CONTENTS
FRANKLIN GROWTH FUND 2
seeks capital appreciation by investing
primarily in common stocks or convertible
securities believed to offer favorable
possibilities for capital appreciation.
FRANKLIN DYNATECH FUND 6
seeks capital appreciation from a portfolio of
companies emphasizing technological
development in fast-growing industries or in
situations which management considers undervalued.
FRANKLIN UTILITIES FUND 10
seeks both capital appreciation and current income
from a portfolio of public utility securities.
FRANKLIN INCOME FUND 14
seeks to maximize income while maintaining
prospects for capital appreciation
through a diversified portfolio of securities.
FRANKLIN U.S. GOVERNMENT
SECURITIES FUND 18
seeks high current income from a
portfolio of U.S. government securities.
RESULTS OF
SHAREHOLDERS' MEETING 22
STATEMENT OF INVESTMENTS 23
FINANCIAL STATEMENTS 40
REPORT OF
INDEPENDENT AUDITORS 53
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most fund reports, such as the fund's annual and semi-annual
reports, may be mailed to a household. Additional copies may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
November 15, 1995
Fellow Shareholder:
We are pleased to bring you the 47th Franklin Custodian Funds, Inc. annual
report, which covers the fiscal year ended September 30, 1995.
During this period, U.S. economic growth slowed, inflation remained under
control, and the Federal Reserve Board seemed to have been successful in
achieving its much sought after "soft landing."
In November 1994, long-term bond rates started to fall, and in July 1995, the
Fed lowered short-term interest rates for the first time in almost three years.
Stock and bond markets responded positively to this news, and on September 30,
1995, the Dow Jones Industrial Average(R) stood at 4789.08, up 24.6% from its
September 30, 1994 level. During the same period, the S&P 500(R) advanced 26.3%,
and long-term bond prices, as measured by 30-year Treasuries, rose 14.38%.*
*Source: Dow Jones Industrial Average; Standard & Poor's 500 Stock Index(R);
Merrill Lynch Long-Term Bond Index. Indices are unmanaged and do not include
reinvested dividends.
While the above mentioned performance statistics have pleased most investors,
experienced investors realize that investment results differ depending on one's
investment objectives and time horizon. Most importantly, history has proven
that over the long term, stocks and bonds have delivered impressive financial
results.** That's why we encourage you to focus on your long-term investment
goals. If you remain invested over the long term, you need not be unduly
concerned with short-term market fluctuations. What's really important is time
in the market -- not timing the market.
**Past performance cannot guarantee future results.
Although market volatility is inevitable, you can lessen its impact upon your
investments by diversifying your portfolio. Since most mutual funds own more
securities than you could invest in on your own, they are an excellent way to
achieve this goal. You can maximize diversification by investing in different
types of stock, bond, and money market funds. On the pages that follow, you'll
find detailed discussions of the five funds included in this report. While each
fund has a distinct investment objective, all of our managers are dedicated to
providing shareholders with careful selection, broad diversification, and
constant professional supervision.
We welcome your questions, thank you for your support, and look forward to
serving you in the future.
Sincerely,
Charles B. Johnson
President
FRANKLIN GROWTH FUND
Equity markets in the U.S. showed surprising strength during the past fiscal
year. Above-average corporate earnings gains and an increased flow of cash into
common stocks were the most significant contributors to this robust performance,
enabling the Dow Jones Industrial Average(R) to reach all-time high levels. In
the industrial sector, earnings rose approximately 12% during the first half of
1995 as a result of falling interest rates, corporate restructuring, and
increased productivity.
The Franklin Growth Fund thrived under these conditions. As you can see in the
Performance Summary on page 4, your fund's Class I shares delivered an
impressive total return of +31.11% for the one-year period ended September 30,
1995. This outpaced the performances of the Dow Jones Average and the Standard &
Poor's 500 Stock Index(R), which posted returns of +27.93% and +29.65%,
respectively, for the same period. The fund's holdings with the largest price
gains during the fiscal year were Cisco Systems, Inc. (+152%), UAL Corp. (+97%),
Wallace Computer Services, Inc. (+93%), and Hewlett-Packard Co. (+91%).
The portfolio's composition did not change dramatically over the course of the
fiscal year, which is a reflection of our "buy and hold" investment strategy.
This strategy provides for relatively low portfolio turnover, which helps lower
the fund's expenses, reduces payouts of taxable capital gains and increases
after-tax total return to shareholders. We typically seek securities of growth
companies that are selling at undervalued prices and hold them for the long
term. In doing so, we do not try to time the market; rather, we continually look
for stocks selling at attractive prices in industries that we believe should
perform well in the future.
On September 30, 1995, the fund held stocks of 87 companies within a diverse
group of industries, including transportation, health care, energy and energy
services, aerospace, and communications and entertainment. Computer Sciences
Corp., a large data processing services company, remained our largest holding at
4.04% of total net assets on September 30, 1995, up from 3.79% on September 30,
1994. During the fiscal year, we purchased additional shares of Minnesota Mining
& Manufacturing Co. (3M Co.). 3M Co. is a diversified manufacturer of
industrial, commercial, health care, and consumer products, whose product line
includes the familiar "Scotch Brand" name that is marketed worldwide. We are
pleased that the value of our pharmaceutical holdings (the fund's largest
sector) appreciated considerably during the fiscal year, which was due in part
to lower interest rates and signs of slower economic growth. In our opinion, the
long-term growth opportunities for pharmaceutical companies appear attractive
because of growing worldwide consumption, advancing technology, exciting new
product developments, and a much clearer direction for the health care industry.
Looking forward, we are optimistic about prospects for the stock market and for
the Franklin Growth Fund. By the end of the reporting period, inflation was
running at a rate of just under 3%, and longer-term interest rates appeared to
be declining, which causes investors to focus on possible positive rates of
return from common stocks. We anticipate continued strong corporate earnings,
which should be reflected in higher stock prices in 1996.
We welcome your comments and suggestions and look forward to serving your
investment needs in the years to come.
GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Growth Fund
Top 10 Holdings on September 30, 1995
Based on Total Net Assets
% of Total
Company Industry Net Assets
Computer Sciences Data Processing 4.04%
Corp.
Schering-Plough Pharmaceuticals 3.23%
Corp.
AMR Corp. Transportation 3.12%
Raytheon Co. Aerospace 2.62%
Delta Air Lines, Inc. Transportation 2.41%
Pfizer, Inc. Pharmaceuticals 2.38%
Minnesota Mining & Diversified 2.36%
Manufacturing Co. Manufacturer
AMP, Inc. Electronics & 2.15%
Electrical Equipment
Hewlett-Packard Co. Electronics & 2.09%
Electrical Equipment
Millipore Corp. Environmental 2.09%
Protection &
Purification
For a complete list of portfolio holdings, please see page 23 of this report.
Performance Summary
The Franklin Growth Fund's Class I shares provided a total return of +31.11% for
the one-year period ended September 30, 1995. Total return measures the change
in value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the fund's maximum initial sales charge.
We encourage shareholders to view their investments with a long-term
perspective. As you can see from the table on the following page, the fund's
Class I shares delivered a cumulative total return of +309.34% for the 10-year
period ended September 30, 1995.
As measured by net asset value, the price of the fund's Class I shares increased
from $14.96 on September 30, 1994 to $19.38 on September 30, 1995, while the
price of the fund's Class II shares increased from $16.85 on May 1, 1995 (the
inception date for these shares), to $19.33 on September 30, 1995.
During the reporting period, Class I shareholders received distributions
totaling 13.5 cents ($0.135) per share in dividend income and 4.2 cents ($0.042)
per share in capital gains, of which 3.76 cents ($0.0376) represented long-term
gains and 0.44 cents ($0.0044) represented short-term gains. Class II
shareholders did not receive distributions because Class II shares were not in
existence when distributions were paid.
Of course, past performance is not predictive of future results, and
distributions will vary depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio.
The graph to the right compares the performance of the Franklin Growth Fund
Class I shares with the performance of the unmanaged Standard & Poor's 500 Stock
Index (S&P 500)(R) over the last 10 years.
Of course, such unmanaged market indices have inherent performance differentials
in comparison with any fund. They don't pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions or market spreads to
buy and sell stocks. And, unlike unmanaged indices, mutual funds are never 100%
invested because of the need to have cash on hand to redeem shares. In addition,
the performance shown for the fund includes the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as the Franklin
Growth Fund's had been applied to this index, its performance would have been
lower. Please remember that an index is simply a measure of performance, and one
cannot invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Growth Fund
Periods ended September 30, 1995
Since Since
Inception Inception
1-Year 5-Year 10-Year (3/31/48) (5/1/95)
- --------------------------------------------------------------------------------
Cumulative
Total Return1
Class I Shares 31.11% 103.85% 309.34% 13,723.45% ---
Class II Shares --- --- --- --- 14.72%
Average Annual
Total Return2
Class I Shares2 5.24% 14.26% 14.60% 10.82% ---
Aggregate
Total Return3
Class II Shares --- --- --- --- 12.58%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.5% initial
sales charge for Class I shares, or the 1.0% initial sales charge and 1.0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current maximum 4.5%
initial sales charge for Class I shares. See note below.
3. Aggregate total return includes the 1.0% initial sales charge and represents
the change in value of an investment since the inception date of the fund's
Class II shares. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of purchase. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See note
below.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge, with dividends reinvested at the offering price. Thus, actual
total return for purchasers of shares during that period would have been
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which will affect future performance. Class II shares, which the fund
began offering on May 1, 1995, are subject to different fees and expenses, which
will affect their performance. Please see the prospectus for more details
regarding Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN DYNATECH FUND
The past fiscal year presented a very favorable environment for equity
securities. Domestic economic growth was solid, while inflation and interest
rates remained at moderate levels. Growth stocks, particularly those in the
technology sector, benefited from this trend, which bolstered the fund's
performance during the period. As you can see from the Performance Summary on
page 8, your fund delivered an impressive total return of +32.10% for the
one-year period ended September 30, 1995.
On September 30, 1995, the fund held stocks of 50 companies, 44% of which were
listed on the New York Stock Exchange and 31% were traded on the
Over-the-Counter market. We maintained our long-standing strategy of seeking
companies that are, or someday may be, leaders within industries such as
semiconductors, electronic equipment, computer software and hardware, health
care and medicine, and environmental services.
Our primary focus continued to be the semiconductor industry, which represented
one of the best market performers during the year. Intel Corp., the fund's
largest holding, has established itself as the world's leading semiconductor
supplier by providing products with increased power and microprocessing speed.
The fund's second-largest position, Motorola, Inc., is also a prominent
semiconductor manufacturer, as well as one of the world's premier providers of
wireless communications equipment. We believe the long-term fundamentals for
this industry remain solid since more powerful microprocessor technology,
coupled with increasingly sophisticated and productive software, is proving to
be a driving force behind its market growth.
GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
During the period, we reduced our cash position and increased the fund's
exposure to the software industry, from 6.2% to 9.4% of total net assets, by
purchasing shares of Adobe Systems, Inc., Computer Sciences Corp., Intuit, Inc.,
and Novell, Inc. Each company is a leader in its product niche, which includes
publishing software, computer services, personal finance software and networking
software, respectively.
We also increased the fund's computer networking exposure with the addition of
Bay Networks, a leading supplier of wide- and local-area networking products. We
also focused on the wireless communication industry, which we believe is still
in its infancy stage, by initiating a position in Airtouch Communications, Inc.,
a leading supplier of wireless communication services. In the computer hardware
sector, we purchased shares of Silicon Graphics, Inc., a computer workstation
supplier specializing in 3-D graphics and multi-media systems.
Health care-related stocks were another area of emphasis during the fiscal year,
representing 8.9% of total net assets by the end of the reporting period. Within
this sector, we established a position in Medtronic, Inc., the world's leading
supplier of implantable cardiac pacemakers. We also purchased shares of
PacifiCare Health Systems, Inc., a provider of managed care services in
California, Oregon, Florida, and Washington.
We believe the fund's prospects remain attractive as we look to 1996. Growth and
technology stocks should benefit from a relatively strong economy, which is
currently showing few signs of inflationary pressures. Many companies in the
fund's portfolio are benefiting from the increased global presence of computing,
telecommunications, and health care services. In our opinion, these trends
should continue over the long term. We remain committed to our strategy of
focusing on companies with superior management teams that can lead their
respective fields in technological development and productivity enhancements,
and we expect to continue investing our cash position as valuations of selected
companies appear attractive. There are, of course, special risks involved in
aggressively seeking capital appreciation, including investment in securities of
a more speculative nature, with a greater emphasis on short-term trading
profits. These risks are further discussed in the fund's prospectus.
We appreciate your participation in the Franklin DynaTech Fund and look forward
to serving your investment needs in the years to come.
Franklin DynaTech Fund
Top 10 Holdings on September 30, 1995
Based on Total Net Assets
% of Total
Company Industry Net Assets
- ------------------------------------------------------
Intel Corp. Semiconductor 13.56%
Manufacturers
Motorola, Inc. Telecommunications 11.50%
Hewlett-Packard Computer Hardware 4.48%
Co.
Microsoft Corp. Computer Software 4.38%
Toys R Us, Inc. Specialty Retailers 3.14%
Thermo Electron Precision Instruments 2.81%
Corp.
Broderbund Computer Software 2.46%
Software, Inc.
WMX Environmental Services 2.45%
Technologies, Inc.
Compaq Computer Hardware 2.34%
Computer Corp.
Cisco Systems, Inc. Networking 2.23%
For a complete list of portfolio holdings, please see page 26 of this report.
Performance Summary
The Franklin DynaTech Fund provided a total return of +32.10% for the one-year
period ended September 30, 1995. Total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains distributions,
and does not include the fund's maximum initial sales charge.
We encourage shareholders to view their investments with a long-term
perspective. As you can see from the table on the following page, the fund
delivered a cumulative total return of more than 257% for the 10-year period
ended September 30, 1995.
The fund's share price, as measured by net asset value, increased from $9.85 on
September 30, 1994 to $12.78 on September 30, 1995. During the reporting period,
shareholders received distributions totaling 4.9 cents ($0.049) per share in
dividend income and 13 cents ($0.13) per share in capital gains, of which 11.66
cents ($0.1166) represented long-term gains and 1.34 cents ($0.0134) represented
short-term gains. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the portfolio.
The graph on page 9 compares the performance of the Franklin DynaTech Fund over
the last 10 years with the performance of the unmanaged Standard & Poor's 500
Stock Index (S&P 500)(R) and the unmanaged Hambrecht & Quist Technology Index.
Please note that the S&P 500(R) is a broad market index that represents stocks
from a variety of industries, not just the technology sector. The Hambrecht &
Quist Technology Index is composed of approximately 200 communications, health
care, and computer hardware and software stocks, and represents a closer
comparison of the securities held by the fund. As you can see, the fund's
performance has lagged that of the Hambrecht & Quist over the past year. This
was due primarily to the fund's lower concentration of smaller capitalization
issues and its relatively large cash position.
It should be remembered that unmanaged market indices have inherent performance
differentials in comparison with any fund. For example, indices don't pay
management fees to cover salaries of security analysts or portfolio managers, or
pay commissions or market spreads to buy and sell stocks. And, unlike unmanaged
indices, mutual funds are never 100% invested because of the need to have cash
on hand to redeem shares. In addition, the performance shown for the fund
includes the maximum initial sales charge, all fund expenses and account fees.
If operating expenses such as the Franklin DynaTech Fund's had been applied to
these indices, their performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 4 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin DynaTech Fund
Periods ended September 30, 1995
Since
Inception
1-Year 5-Year 10-Year (1/1/68)
- -------------------------------------------------------------------------------
Cumulative
Total Return1 32.10% 119.47% 257.70% 948.59%
Average Annual
Total Return2 26.21% 15.95% 13.08% 8.65%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.5% initial
sales charge. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current maximum 4.5%
initial sales charge. See note below.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been different
than noted above. Effective May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a plan of distribution under Rule 12b-1,
which will affect future performance. All total return calculations assume
reinvestment of dividends and capital gains at net asset value. Investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
FRANKLIN UTILITIES FUND
During the fiscal year ended September 30, 1995, interest rates eased
substantially. The yield on the 30-year U.S. Treasury bond fell from 7.82% on
September 30, 1994, to 6.49% on September 30, 1995. Falling interest rates tend
to boost prices of the utility stocks in which the fund invests, and this drop
in rates had a very favorable effect on the Fund's holdings. As shown in the
Performance Summary on page 12, the Franklin Utilities Fund's Class I shares
produced a total return of +24.19% for the period under review.
As you know, your fund maintains a majority of its assets in domestic electric
utility stocks (approximately 91% of total net assets). Utility stocks continued
the rebound that began in November 1994. The move toward greater competition has
made companies focus more heavily on becoming the low cost providers of power.
This has had the benefit of increasing earnings more rapidly than expected. For
example, in the third quarter ending June 30, 1995, earnings per share rose by
8.5% compared to earnings one year earlier. This gain in earnings came primarily
from cutting operating and maintenance expenses and curtailing capital
expenditures. This experience made it evident that the reservoir for potential
cost reduction is larger than generally believed, and should continue to benefit
electric utility companies in the future. Competitive pressures also led to
consolidation within the industry in an effort to take advantage of the
synergies between companies in order to further lower costs. Over the year, a
number of mergers were announced or completed that involved several of our
holdings, including CIPSCO, Wisconsin Energy, Pennsylvania Power & Light, Sierra
Pacific Resources, and Southwestern Public Service.
In addition to our focus on electric utility companies, we seek investment
opportunities in other areas of the utility industry. Over the reporting period,
we added to our holdings in domestic telephone and natural gas utility
companies, which represented approximately 7% of the fund's total net assets on
September 30, 1995. These investments offer many of the same characteristics
that we look for in our electric utility stock holdings: consistent predictable
earnings growth and steady demand fundamentals.
One principle concern is the changing regulatory environment of the utility
industry. For this reason, we have focused specifically on those utilities that
we believe are best positioned to handle increasing competition. Such utilities
have low production costs, strong entrepreneurial management teams, and service
territories located in regions with positive demographic trends. We believe that
these utilities will produce higher total returns than their peers as they
capture a larger part of a more competitive marketplace.
Even after the impressive gains of utility stocks over the past 12 months, their
relative valuations still appear attractive. For example, the average yield of
electric utility stocks is currently about 6.5%, almost at parity with the yield
of the 30-year U.S. Treasury bond (6.65%). Analysis based on this type of
comparison indicates that electric utility stocks remain good investments. We
believe that utilities provide services that are an essential part of everyday
life and that, in spite of the potential for regulatory change in the industry,
utility stocks will continue to play an important role in a well-diversified
investment portfolio.
GRAPHIC MATERIAL 5 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Utilities Fund
Top 10 Holdings on September 30, 1995
Based on Total Net Assets
% of Total
Company Net Assets
- -------------------------------------------------------------------------------
Southern Company 4.99%
General Public Utilities Corp. 4.00%
Duke Power Co. 3.87%
American Electric Power Co., Inc. 3.78%
Pacific Gas & Electric 3.69%
Central &Southwest Corp. 3.56%
Allegheny Power System, Inc. 3.41%
TECO Energy, Inc. 3.30%
Scana Corp. 3.17%
Texas Utilities Co. 3.02%
For a complete listing of portfolio holdings, please see page 29 of this report.
Performance Summary
The Franklin Utilities Fund's Class I shares provided a total return of +24.19%
for the one-year period ended September 30, 1995. Total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains distributions, and does not include sales charges.
We encourage shareholders to view their investment with a long-term perspective.
As you can see from the table to the right, the fund delivered a cumulative
total return of +195.58% for the 10-year period ended September 30, 1995.
The price of the fund's Class I shares, as measured by net asset value,
increased from $8.33 on September 30, 1994, to $9.75 on September 30, 1995,
while the price of its Class II shares increased from $8.86 on May 1, 1995, to
$9.75 on September 30, 1995.
During the reporting period, Class I shareholders received distributions
totaling 52.4 cents ($0.524) per share in dividend income and 0.7 cents ($0.007)
per share in long-term capital gains. Class II shareholders received
distributions totaling 24.8 cents ($0.248) per share in dividend income over the
abbreviated five-month reporting period ended September 30, 1995.
Of course, past performance is not predictive of future results, and
distributions will vary, depending on income earned by the fund and any profits
realized from the sale of securities in the portfolio.
Based on the maximum offering price of $10.18 on September 30, 1995, and an
annualization of the most recent quarterly dividend of 13.1 cents ($0.131) per
share, the distribution rate of the fund's Class I shares was 5.15%. For Class
II shares, the distribution rate was 4.91%, based on an annualization of the
most recent quarterly dividend of 12.1 cents ($0.121) per share and the maximum
offering price of $9.85 on September 30, 1995.
The graph to the right compares the performance of the Franklin Utilities Fund
Class I shares over the last 10 years with the performance of the unmanaged
Standard & Poor's 500 Stock Index (S&P 500)(R).
Please note that the S&P 500(R) is a broad market index that represents stocks
from a variety of industries, not just the utility sector. Of course, an
unmanaged index has inherent performance differentials in comparison with any
fund. They don't pay management fees to cover salaries of security analysts or
portfolio managers, or pay commissions or market spreads to buy and sell stocks.
And, unlike the unmanaged market indices, mutual funds are never 100% invested
because of the need to have cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses such as the Franklin
Utilities Fund's had been applied to these indices, their performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest in an index directly. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 6 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Utilities Fund
Periods ended September 30, 1995
Since Since
Inception Inception
1-Year 5-Year 10-Year (9/30/48) (5/1/95)
- --------------------------------------------------------------------------------
Cumulative
Total Return1
Class I Shares 24.19% 77.06% 195.58% 9,674.74% ---
Class II Shares --- ---- --- ---- 13.01%
Average Annual
Total Return2
Class I Shares 18.91% 11.14% 10.96% 10.13% ---
Aggregate
Total Return3
Class II Shares --- --- --- --- 10.89%
Distribution Rate4
Class I Shares 5.15%
Class II Shares 4.91%
30-Day Standardized Yield5
Class I Shares 5.29%
Class II Shares 4.97%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.25% initial
sales charge for Class I shares, or the 1.00% initial sales charge and 1.00%
Contingent Deferred Sales Charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current maximum 4.25%
initial sales charge for Class I shares. See note below.
3. Figures represent aggregate total returns, which include the 1.00% initial
sales charge and represent the change in value of an investment since the
inception date of the fund's Class II shares. It also includes the 1.00% CDSC
applicable to shares redeemed within 18 months of purchase. Since Class II
shares have existed for less than one year, average annual total returns are not
provided. See note below.
4. Class I shares distribution rate is based on an annualization of the fund's
current 13.1 cents per share quarterly dividend and the maximum offering price
of $10.18 on September 30, 1995. Class II shares distribution rate is based on
an annualization of the fund's current 12.1 cents per share quarterly dividend
and the maximum offering price of $9.85 on September 30, 1995.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio during the 30 days ended September 30, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of distribution
under Rule 12b-1, which will affect future performance. Class II shares, which
the fund began offering on May 1, 1995, are subject to different fees and
expenses, which will affect their performance. Please see the prospectus for
more details regarding Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance cannot guarantee future results.
FRANKLIN INCOME FUND
During the course of the past fiscal year, many stock and bond markets benefited
from relatively low inflation and falling interest rates caused by a slowdown in
the U.S. economy. As a result, many of the Franklin Income Fund's holdings
appreciated, which enabled the fund to deliver a one-year total return of
+14.00%, as shown in the Performance Summary on page 16.
As you know, the fund has the flexibility to invest in any combination of
stocks, bonds and cash as market opportunities warrant. At the end of the fiscal
year, 46% of the fund's total net assets were invested in bonds, 32% in stocks,
and the remaining 22% in cash. This relatively large cash position reflected the
fund's defensive posture following this year's robust performance of stock and
bond markets. The fund's bond holdings are composed of corporate, foreign and
U.S. Treasury bonds. Corporate bonds, which represented our largest fixed-income
weighting, increased from 24% of total net assets on September 30, 1994 to 31%
on September 30, 1995.
When investing in corporate bonds, we seek issues that offer attractive yields
and capital appreciation potential. At the same time, we look for companies with
significant underlying assets and ample cash flow to service debt. Many of the
fund's approximately 100 corporate bond positions performed well due to lower
interest rates and improved company operations. Companies such as Revlon
Consumer Products Corp., IMC Fertilizer Group, Inc., and Midland CoGeneration
Venture experienced significant increases in revenue and cash flow during the
fiscal year. Improved operating results enabled Bell & Howell Co., Falcon
Drilling, and Sola Group, Ltd. to complete initial public stock offerings, which
enhanced their credit ratings. The announced acquisitions of Cablevision
Industries, Dr. Pepper/Seven-Up Cos. and Southern Pacific Rail Corp. by larger
companies led to appreciation in the value of our bond holdings of these
companies. New corporate bond issues purchased during the fiscal year include
Boardwalk Casino, Inc., CommNet Cellular, Inc., and Marcus Cable Co. Investors
should be aware that the fund may invest a substantial amount of its assets in
any investment sector, including lower-rated bonds, which en-tail a greater
degree of risk than investment-grade bonds.*
*These and other risks are discussed in the fund's prospectus.
On September 30, 1994, our U.S. Treasury bond exposure stood at 10.4% of total
net assets. Anticipating lower interest rates, we added to these holdings at the
beginning of 1995. Subsequently, interest rates declined to a level that
prompted us to recognize gains on the majority of our Treasury bonds, which
decreased the overall weighting to 3.1% by the end of the reporting period.
With regard to foreign bonds, we added to our South African and
dollar-denominated Argentina Brady bonds, while reducing the fund's holdings of
Mexican CETES and Canadian bonds. Strong performances by the South African and
Canadian bond markets offset the weakness suffered by our Latin American bonds
as a result of Mexico's currency devaluation in December. Our net foreign bond
exposure was relatively unchanged at 12.3% of total net assets.
GRAPHIC MATERIAL 7 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
With the exception of gold stocks, all of the fund's equity sectors performed
well during the fiscal year, with pharmaceutical stocks appreciating the most.
In 1993, we took a contrarian approach and purchased shares of American Home
Products Corp., Bristol-Myers Squibb Co., Merck & Co., Inc., and Upjohn Co. when
the threat of health care reform depressed many drug stocks. This year, the
improved outlook for company earnings, as well as the pharmaceutical industry in
general, led to significant price gains for these holdings.
We increased our exposure to the utilities sector, from 13.5% to 16.3% of total
net assets, because we believe that electric utility companies are adapting to
their increasingly competitive environment. Utilizing fundamental research and a
value-oriented approach, we initiated positions in Entergy Corp., Potomac
Electric Power Co., New England Electric Systems, and Scana Corp.
Due to strength in the financial services sector, we recognized significant
gains on several bank stocks, including convertible preferred issues of Citicorp
and Chemical Banking Corp. Both offered limited call protection and low, current
dividend income. Similarly, we recognized gains on several energy, gold,
technology and cyclical convertible securities, such as convertible preferred
stocks of Canadian Occidental, Transco Energy Co., and Echo Bay Finance Corp.,
and convertible bonds of Genzyme Corp., VLSI Technology, Inc., and Sanifill,
Inc.
With stock and bond markets at near-record levels by the end of the reporting
period, we remain cautious, holding approximately 22% of the fund's assets in
cash. This should enable us to take advantage of future investment opportunities
as we utilize our research and experience in seeking income and growth from a
diversified mix of stocks, bonds, and cash.
We appreciate your participation in the Franklin Income Fund and welcome your
comments or suggestions.
Performance Summary
The Franklin Income Fund's Class I shares provided a total return of +14.00% for
the one-year period ended September 30, 1995. Total return measures the change
in value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the fund's maximum initial sales charge.
We encourage shareholders to view their investments with a long-term
perspective. As you can see from the table on the following page, the fund's
Class I shares delivered a cumulative total return of +224.69% for the 10-year
period ended September 30, 1995.
The price of the fund's Class I shares, as measured by net asset value,
increased from $2.22 on September 30, 1994 to $2.30 on September 30, 1995, while
the price of the fund's Class II shares increased from $2.17 on May 1, 1995 (the
inception date for these shares), to $2.30 on September 30, 1995.
During the reporting period, Class I shareholders received distributions
totaling 18 cents ($0.18) per share in dividend income and 2.8 cents ($0.028)
per share in long-term capital gains. Class II shareholders received
distributions totaling 7.2 cents ($0.072) per share in dividend income over the
abbreviated five-month reporting period ended September 30, 1995. Based on the
maximum offering price of $2.40 on September 30, 1995 and an annualization of
the September 1995 dividend of 1.5 cents ($0.015) per share, the distribution
rate for the fund's Class I shares was 7.50%. For Class II shares, the
distribution rate was 7.76%, based on an annualization of the September 1995
dividend of 1.5 cents ($0.015) per share and the maximum offering price of $2.32
on September 30, 1995. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the portfolio.
The graph to the right compares the performance of the Franklin Income Fund
Class I shares over the last 10 years with the performance of two unmanaged
indices, the Standard & Poor's 500 Stock Index (S&P 500)(R) and the Lehman
Brothers Government/Corporate Bond Index. It also compares the fund's
performance with the average performance of 22 other income funds, as measured
by Lipper Analytical Services, Inc. As you can see, the fund outperformed the
Lehman Brothers index and the Lipper Income Funds average.
Of course, such unmanaged market indices have inherent performance differentials
in comparison with any fund. They don't pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions or market spreads to
buy and sell stocks. And, unlike unmanaged indices, mutual funds are never 100%
invested because of the need to have cash on hand to redeem shares. In addition,
the performance shown for the fund includes the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as the Franklin
Income Fund's had been applied to these indices, their performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest in an index directly. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 8 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Income Fund
Periods ended September 30, 1995
Since Since
Inception Inception
1-Year 5-Year 10-Year (8/31/48) (5/1/95)
- --------------------------------------------------------------------------------
Cumulative
Total Return1
Class I Shares 14.00% 112.83% 224.69% 16,150.12% ---
Class II Shares --- --- --- --- 8.96%
Average Annual
Total Return2
Class I Shares 9.09% 15.28% 12.02% 11.31% ---
Aggregate
Total Return3
Class II Shares --- --- --- --- 6.98%
30-Day Standardized Yield4
Class I Shares 7.90%
Class II Shares 7.66%
Distribution Rate5
Class I Shares 7.50%
Class II Shares 7.76%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and 1.0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the current maximum 4.25%
initial sales charge for Class I shares. See note below.
3. Aggregate total return includes the 1.0% initial sales charge and represents
the change in value of an investment since the inception date of the fund's
Class II shares. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of purchase. Since Class II shares have existed for
less than one year, average annual total returns are not provided.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio during the 30 days ended September 30, 1995. 5. The
distribution rate for Class I shares is based on an annualization of the fund's
September 1995 dividend of 1.5 cents per share and the maximum offering price of
$2.40 on September 30, 1995. For Class II shares, distribution rate is based on
an annualization of the fund's September 1995 dividend of 1.5 cents per share
and the maximum offering price of $2.32 on September 30, 1995. This rate
reflects an adjustment to the Class II dividend which reconciles the 12b-1
differential between Class I and Class II shares. Subsequent dividend
distributions may revert to the dividend amount prior to the adjustment.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
return for purchasers of shares during that period would have been different
than noted above. Effective May 1, 1994, the fund eliminated the sales charge on
reinvested dividends and implemented a plan of distribution under Rule 12b-1,
which will affect future performance. Class II shares, which the fund began
offering on May 1, 1995, are subject to different fees and expenses that will
affect their performance. Please see the prospectus for more details regarding
Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Over the past 12 months, the U.S. Treasury market rallied in response to market
expectations of a slower economic growth rate with sustained low inflation.
After the Fed-eral Reserve Board's two initial increases in short-term interest
rates, it finally lowered rates on July 6, 1995, to 5.75% from 6.00%, suggesting
that the Fed may have successfully engineered its much sought after "soft
landing," while long-term rates also fell during the fiscal year. For example,
the 30-year Treasury bond yield fell to 6.49% as of September 30, 1995, from
7.82% the previous year.
Amid market fluctuations, the Franklin U.S. Government Securities Fund remains
invested in Government National Mortgage Association (GNMA) securities, common
known as Ginnie Maes. These securities have appreciated in value over the past
year, allowing the fund to record a cumulative total return of +13.56%. Total
return measures the change in value of an investment over the period indicated,
and assumes reinvestment of dividends and capital gains.
Investors may be concerned with the increased use of exotic derivative
securities by some GNMA mutual funds. These securities gained popularity when
interest rates declined; however, being relatively new to the market, they
quickly decreased in value as short-term interest rates increased during 1994.
The Franklin U.S. Government Securities Fund does not invest, nor has it ever
invested in derivative securities, and management continues to employ its
conservative, "plain vanilla" investment strategy. The chart on the following
page illustrates the fund's risk/return profile, relative to 10- and 30-year
Treasuries and one-year Certificates of Deposit.+ The average annual total
return of 10-year Treasuries over the five years ended September 30, 1995, was
only slightly higher than the average annual total return of the Franklin U.S.
Government Securities Fund for the same period. However, their volatility was
significantly higher than the fund's.
+ The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. CDs are insured by the FDIC for up to $100,000
and offer a fixed rate of return. Investment return and share price of the
Franklin U.S. Government Securities Fund will fluctuate with market conditions.
On September 31, 1995, 97.16% of the fund's total net assets were invested in
GNMA securities, with the remaining 2.84% invested in U.S. Treasuries. The
fund's average maturity remained stable at 25 years, with an average life of
6.94 years. The fund's average coupon fell slightly to 7.97% from 8.00% at the
start of the reporting period.
The fund's 30-day yield rose, however, to 7.06% on September 30, 1995, from
6.99% a year earlier. The fund's 30-day yield compared favorably with other
types of investments, as the chart on the following page illustrates.
Looking forward, we believe the recent decline in mortgage rates should
stimulate the housing sector of the economy and lead to increased economic
activity in the near future. Provided inflationary pressures remain constrained,
we expect the Fed to take a neutral, to more relaxed stance, regarding monetary
policy in the near term.
With a moderate growth rate and inflation under control, we believe the outlook
for government and agency securities is positive, since the cost of borrowing
should remain low. In addition, bond prices tend to rise when long-term interest
rates fall, making the older, higher-yielding securities in which the fund
invests more desirable, compared to newer bonds yielding less.
Political environments also tend to influence financial markets, and as we
approach the 1996 presidential elections, we believe conservative efforts to
balance the budget may prevail. This contributes to a continued positive outlook
for the economy.
Over the long term, reducing the Federal Housing Authority's role could
potentially decrease the future supply of Ginnie Maes. This modification could
subsequently add scarcity value and enhance the value of Ginnie Maes in
comparison to other securities. Given these conditions, we believe the Franklin
U.S. Government Securities Fund is poised to perform well in the upcoming year.
GRAPHIC MATERIAL 9 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 10 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Franklin U.S. Government Securities Fund Class I shares provided a cumulative
total return of +13.56% for the one-year period ended September 30, 1995. Total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains at net asset value, and excludes the maximum initial
sales charge. Past performance is not predictive of future results.
The price of the fund's Class I shares, as measured by net asset value,
increased to $6.87 on September 30, 1995, from $6.51 on September 30, 1994. On
September 30,1995 the price of your fund's Class II shares, as measured by net
asset value, increased to $6.85 from $6.63 on May 1, 1995, the fund's Class II
inception date.*
* The fund paid a dividend to shareholders of record at the beginning of
business on May 1, 1995, in the amount of 4.1 cents per share. The $6.63 net
asset value price includes this dividend.
The fund continued to meet its investment objective of providing a high level of
current income to its shareholders, and Class I shares paid monthly income
distributions totaling 48.5 cents ($0.485) per share during the one-year period
ended September 30, 1995. Due to the fund's increased income, we were able to
raise the monthly dividend to 4.1 cents ($0.041) per share from 4.0 cents
($0.040) per share, effective with the May 1995 distribution. Based on an
annualization of the September dividend of 4.1 cents ($0.041) per share and the
maximum offering price of $7.17, your fund's Class I share distribution rate was
6.86% on September 30, 1995.
During the reporting period, the fund's Class II shares paid income totaling
19.3 cents ($0.193) per share for the abbreviated five-month reporting period
ended
September 30, 1995. Dividends will vary based on the earnings of the fund's
portfolio, and past distributions are not necessarily predictive of future
results. Based on annualization of the current monthly dividend of 4.1 cents
($0.041) per share and the maximum offering price of $6.92 on September 30,
1995, your fund's Class II share distribution rate was 7.11%.
The graph to the right compares the performance of the Franklin U.S. Government
Securities Fund's Class I shares with the Consumer Price Index (CPI) and the
Lehman Brothers Intermediate U.S. Government Bond Index over the past 10 years.
As the graph illustrates, the total return of the Franklin U.S. Government
Securities Fund has far outperformed the CPI, keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. Your fund's performance
has closely followed the performance of the unmanaged Lehman Brothers
Intermediate U.S. Government Bond Index. Of course, unmanaged market indices
have inherent performance differentials in comparison to any fund. The unmanaged
market indices, such as the Lehman Brothers Index, do not pay market spreads to
buy and sell bonds. Further, they do not pay expenses for fund costs. And,
unlike the unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. In addition, the performance
shown for the fund includes the maximum sales charge, all fund expenses and
account fees. If operating expenses such as the fund's had been applied to the
index, its performance would have been lower. Please remember that an index is
simply a measure of performance and cannot be invested in directly.
GRAPHIC MATERIAL 11 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin U.S. Government Securities Fund
Periods ended September 30, 1995
Since Since
Inception Inception
1-Year 5-Year 10-Year (2/1/77) (5/1/95)
- --------------------------------------------------------------------------------
Cumulative
Total Return1
Class I Shares 13.56% 49.93% 136.19% 539.30% --
Class II Shares --- --- --- --- 5.66%
Average Annual
Total Return2
Class I Shares 8.72% 7.51% 8.50% 7.41% ---
Aggregate
Total Return3
Class II Shares --- --- --- --- 3.58%
Distribution Rate4
Class I Shares 6.86%
Class II Shares 7.11%
30-Day Standardized Yield5
Class I Shares 6.55%
Class II Shares 6.21%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.25% initial
sales charge for Class I shares, or the maximum 1.0% initial sales charge and
1.0% Contingent Deferred Sales Charge (CDSC) for Class II shares, applicable to
shares redeemed within 18 months of investment. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures reflect the maximum 4.25%
initial sales charge for Class I shares.
3. Aggregate total return includes the 1.0% initial sales charge and represents
the change in value of an investment since the inception date of the fund's
Class II shares. It also includes the 1.0% CDSC applicable to shares redeemed
within 18 months of purchase. Since Class II shares have existed for less than
one year, average annual total returns are not provided. See note below.
4. Class I shares distribution rate is based on an annualization of the fund's
current 4.1 cents per share monthly dividend and the maximum offering price of
$7.17 on September 30, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.1 cents per share monthly dividend and the
maximum offering price of $6.92 on September 30, 1995. This rate reflects an
adjustment to the Class II dividend, which reconciles the 12b-1 differential
between Class I and Class II shares. Subsequent dividend distributions may
revert to the dividend amount prior to adjustment.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended September 30, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of distribution
under Rule 12b-1, which will affect future performance. Historical performance
data shown above pertain only to Class I shares of the fund. Class II shares,
which the fund began offering on May 1, 1995, are subject to different fees and
expenses, which will affect their performance. Please see the prospectus for
more details regarding Class I and Class II shares.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance cannot guarantee future results.
FRANKLIN CUSTODIAN FUNDS, INC.
SPECIAL MEETING OF SHAREHOLDERS
At a special meeting of shareholders of the Franklin Custodian Funds, Inc. held
on March 20, 1995, shareholders of the Funds voted on an amendment to the Funds'
Articles of Incorporation to permit the issuance of additional classes of shares
and to make other conforming changes. The proposal was approved by shareholders
and the vote was as follows:
Fund For Against Abstain
Franklin Growth Fund 18,014,768 1,052,764 1,584,756
Franklin Utilities Fund 150,816,331 9,878,977 10,976,520
Franklin DynaTech Fund 3,551,271 292,008 195,175
Franklin Income Fund 1,136,813,541 68,673,898 80,214,077
Franklin U.S. Government
Securities Series 893,338,983 53,759,182 59,281,814
At the same meeting the shareholders also voted on the approval of an amendment
to the Income Series' investment policies which would permit the Income Series
to invest in trade claims. The proposal was approved by shareholders and the
vote was as follows:
For Against Abstain
1,079,089,102 121,405,677 85,206,438
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Franklin Custodian Funds, Inc., September 30, 1995
VALUE
SHARES Growth Fund (NOTE1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.6%
Aerospace 8.2%
<S> <C> <C>
200,000 Boeing Co. ...............................................................................$ 13,650,000
162,600 Lockheed Corp. ........................................................................... 10,914,525
221,000 Raytheon Co. ............................................................................. 18,785,000
50,000 Rockwell International Corp. ............................................................. 2,362,500
120,000 Thiokol Corp. ............................................................................ 4,290,000
100,000 United Technologies Corp. ................................................................ 8,837,500
-----------------
58,839,525
-----------------
Auto Parts .5%
90,000 Genuine Parts Co. ........................................................................ 3,611,250
-----------------
aBiotechnology 2.2%
200,000 Amgen, Inc. .............................................................................. 9,975,000
120,000 Genentech, Inc. .......................................................................... 5,835,000
20,000 Immunex Corp. ............................................................................ 285,000
8,000 Therapeutic Discovery Corp. .............................................................. 58,000
-----------------
16,153,000
-----------------
Business Services 4.7%
110,000 Avery Dennison Corp. ..................................................................... 4,620,000
244,000 Dun & Bradstreet Corp. ................................................................... 14,121,500
200,000 Equifax, Inc. ............................................................................ 8,375,000
250,000 Kelly Services, Inc., Class A ............................................................ 6,687,500
345,300a,e,f,gProgramming & Systems, Inc................................................................ 6,906
-----------------
33,810,906
-----------------
Chemicals 4.3%
200,000 Air Products & Chemicals, Inc. ........................................................... 10,425,000
25,000 Eastman Chemical Co. ..................................................................... 1,600,000
20,000 Loctite Corp. ............................................................................ 967,500
116,000 Mallinckrodt Group, Inc. ................................................................. 4,596,500
145,000 NCH Corp. ................................................................................ 8,301,250
100,000 Sigma-Aldrich Corp. ...................................................................... 4,850,000
-----------------
30,740,250
-----------------
Communications & Entertainment 7.0%
300,000 American Greetings Corp., Class A ........................................................ 9,150,000
100,000 Capital Cities/ABC, Inc. ................................................................. 11,762,500
200,000 Disney (Walt) Co. ........................................................................ 11,475,000
100,000 a Intervisual Books, Inc. .................................................................. 243,750
10,000 a King World Productions, Inc. ............................................................. 366,250
300,000 Time Warner, Inc. ........................................................................ 11,925,000
200,000 Turner Broadcasting Systems, Class A...................................................... 5,525,000
-----------------
50,447,500
-----------------
Cosmetics .2%
12,700 International Flavors and Fragrances, Inc. ............................................... 612,775
50,000 a Perrigo Co. .............................................................................. 612,500
-----------------
1,225,275
-----------------
Data Processing 9.5%
200,000 Automatic Data Processing, Inc. .......................................................... 13,625,000
450,000 a Computer Sciences Corp. .................................................................. 28,968,750
140,000 International Business Machines Corp. .................................................... 13,212,500
210,000 Wallace Computer Services, Inc. .......................................................... 11,970,000
-----------------
67,776,250
-----------------
Diversified Manufacturers 3.1%
300,000 Minnesota Mining & Manufacturing Co. ..................................................... 16,950,000
100,000 National Service Industries, Inc. ........................................................ 2,925,000
66,600 Teleflex, Inc. ........................................................................... 2,697,300
-----------------
22,572,300
-----------------
Electronics & Electrical Equipment 6.7%
30,000 a American Power Conversion Corp. .......................................................... $ 367,500
400,000 AMP, Inc. ................................................................................ 15,400,000
40,000 Emerson Electric Co. ..................................................................... 2,860,000
180,000 Hewlett-Packard Co. ...................................................................... 15,007,500
75,000 Molex, Inc. .............................................................................. 2,718,750
75,000 Molex, Inc., Class A ..................................................................... 2,512,500
200,000 Raychem Corp. ............................................................................ 9,000,000
-----------------
47,866,250
-----------------
Energy/Energy Services 4.4%
90,000 Atlantic Richfield Co. ................................................................... 9,663,750
300,000 Coastal Co. .............................................................................. 10,087,500
40,000 Murphy Oil Corp. ......................................................................... 1,600,000
70,000 Royal Dutch Petroleum Co., New York Shares ............................................... 8,592,500
30,000 Schlumberger, Ltd. ....................................................................... 1,957,500
-----------------
31,901,250
-----------------
Environmental Protection & Purification 7.8%
100,000 Betz Laboratories, Inc. .................................................................. 4,087,500
165,000 Browning-Ferris Industries, Inc. ......................................................... 5,011,875
230,000 a Ionics, Inc. ............................................................................. 9,573,750
400,000 Millipore Corp. .......................................................................... 15,000,000
256,500 a Osmonics, Inc. ........................................................................... 4,520,812
209,100 Pall Corp. ............................................................................... 4,861,575
270,000 Wheelabrator Technology, Inc. ............................................................ 4,016,250
210,000 WMX Technologies, Inc. ................................................................... 5,985,000
100,000 Zurn Industries, Inc. .................................................................... 2,537,500
-----------------
55,594,262
-----------------
Food/Confectionery 1.2%
129,100 Hershey Foods Corp. ...................................................................... 8,310,813
-----------------
Health Care - Diversified 9.9%
200,000 Abbott Laboratories....................................................................... 8,525,000
200,000 Allergan, Inc. ........................................................................... 6,675,000
100,000 a Alza Corp., Class A ...................................................................... 2,300,000
150,000 American Home Products Corp. ............................................................. 12,731,250
250,000 Baxter International, Inc. ............................................................... 10,281,250
62,500 Caremark International, Inc. ............................................................. 1,343,750
100,000 a Forest Laboratories, Inc., Class A ....................................................... 4,450,000
200,000 Johnson & Johnson, Inc. .................................................................. 14,825,000
22,000 Natures Sunshine Products, Inc. .......................................................... 495,000
200,000 a Respironics, Inc. ........................................................................ 3,850,000
200,000 U.S. Surgical Corp. ...................................................................... 5,350,000
-----------------
70,826,250
-----------------
Imaging/Photography 1.7%
180,000 Eastman Kodak Co. ........................................................................ 10,665,000
38,000 Polaroid Corp. ........................................................................... 1,510,500
-----------------
12,175,500
-----------------
Pharmaceuticals 10.0%
160,000 Bristol-Myers Squibb Co. ................................................................. 11,660,000
100,000 Lilly (Eli) & Co. ........................................................................ 8,987,500
200,000 Merck & Co., Inc. ........................................................................ 11,200,000
320,000 Pfizer, Inc. ............................................................................. 17,080,000
450,000 Schering-Plough Corp. .................................................................... 23,175,000
-----------------
72,102,500
-----------------
Retailers 2.0%
300,000 Tiffany & Co. ............................................................................$ 12,562,500
58,218 Weis Markets, Inc. ....................................................................... 1,615,549
-----------------
14,178,049
-----------------
aTelecommunications 2.5%
225,000 Cabletron Systems, Inc. .................................................................. 14,821,875
20,000 Cisco Systems, Inc. ...................................................................... 1,380,000
200,000 Network Computing Devices................................................................. 1,375,000
-----------------
17,576,875
-----------------
Transportation 8.7%
310,000 a AMR Corp. ................................................................................ 22,358,750
250,000 Delta Air Lines, Inc. .................................................................... 17,312,500
87,500 a UAL Corp. ................................................................................ 14,951,563
120,000 Union Pacific Corp. ...................................................................... 7,950,000
-----------------
62,572,813
-----------------
Total Common Stocks (Cost $393,355,492)................................................... 678,280,818
-----------------
FACE
AMOUNT
- ----------
k,l Receivables from Repurchase Agreements 5.3%
$39,013,310 Joint Repurchase Agreement, 6.429%, 10/02/95 (Cost $38,281,016)
Daiwa Securities America, Inc., (Maturity Value $18,800,798)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $19,500,726)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00..................... 38,281,016
-----------------
Total Investments (Cost $431,636,508) 99.9%............................................... 716,561,834
Other Assets and Liabilities, Net.1%...................................................... 464,260
-----------------
Net Assets 100.0%.........................................................................$717,026,094
=================
At September 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $431,636,508 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost $293,026,567
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost over value ........................................ (8,101,241)
-----------------
Net unrealized appreciation...............................................................$284,925,326
=================
</TABLE>
aNon-income producing.
eSee Note 1(a) regarding securities valued by the Board of Directors.
fSee Note 10 regarding holdings of 5% voting securities.
gTrading suspended.
kFace amount for repurchase agreements is for the underlying collateral.
lSee Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Franklin Custodian Funds, Inc., September 30, 1995
VALUE
SHARES DynaTech Fund (NOTE1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks 75.1%
Computer Hardware 7.6%
<S> <C> <C>
45,000 a Compaq Computer Corp. .........................................................................$ 2,176,875
10,000 a EMC Corp. - Mass .............................................................................. 181,250
50,000 Hewlett-Packard Co. ........................................................................... 4,168,750
15,000 a Silicon Graphics, Inc. ........................................................................ 515,625
-----------------
7,042,500
-----------------
Computer Software 9.4%
10,000 Adobe Systems, Inc. ........................................................................... 517,500
30,000 a Broderbund Software, Inc. ..................................................................... 2,283,750
10,000 a Computer Sciences Corp. ....................................................................... 643,750
10,000 a Intuit, Inc. .................................................................................. 470,000
45,000 a Microsoft Corp. ............................................................................... 4,072,500
10,000 a Novell, Inc. .................................................................................. 182,500
15,000 a Oracle Corp. .................................................................................. 575,625
1,400 a Tivoli Systems, Inc. .......................................................................... 39,725
-----------------
8,785,350
-----------------
Data Services 1.5%
10,000 Equifax, Inc. ................................................................................. 418,750
7,000 First Data Corp. .............................................................................. 434,000
5,000 First Financial Management Corp. .............................................................. 488,125
-----------------
1,340,875
-----------------
Environmental Services 3.1%
20,000 Browning-Ferris Industries, Inc. .............................................................. 607,500
80,000 WMX Technologies, Inc. ........................................................................ 2,280,000
-----------------
2,887,500
-----------------
Media/Programming 2.0%
20,000 News Corp. Ltd., ADR .......................................................................... 440,000
19,500 a Tele-Communications, Inc. ..................................................................... 341,250
10,000 Time Warner, Inc. ............................................................................. 397,500
24,875 a Liberty Media Group - Class A ................................................................. 665,406
-----------------
1,844,156
-----------------
Medical Services 4.1%
15,000 Columbia/HCA Healthcare Corp. ................................................................. 729,375
50,000 a Humana, Inc. .................................................................................. 1,006,250
10,000 Medtronic, Inc. ............................................................................... 537,500
5,000 a PacifiCare Health Systems, Inc. - Class B...................................................... 340,000
25,000 United Healthcare Corp. ....................................................................... 1,221,875
-----------------
3,835,000
-----------------
Networking 5.0%
15,000 a Bay Networks, Inc. ............................................................................ 800,625
30,000 a Cisco Systems, Inc. ........................................................................... 2,070,000
40,000 a 3Com Corp. .................................................................................... 1,820,000
-----------------
4,690,625
-----------------
Pharmaceutical Manufacturers 3.6%
15,000 Merck & Co., Inc. ............................................................................. 840,000
20,000 Schering-Plough Corp. ......................................................................... 1,030,000
15,000 Warner-Lambert Co. ............................................................................ 1,428,750
-----------------
3,298,750
-----------------
Precision Instruments/Test Equipment 3.5%
10,000 Schlumberger, Ltd. ............................................................................ 652,500
56,250 a Thermo Electron Corp. ......................................................................... 2,608,594
-----------------
3,261,094
-----------------
Common Stocks (cont.)
Semiconductor/Manufacturer 13.8%
7,700 a AVX Corp. ..................................................................................... $ 257,950
210,000 Intel Corp. ................................................................................... 12,626,250
-----------------
12,884,200
-----------------
Specialty Pharmaceuticals 1.2%
15,000 a Noven Pharmaceuticals, Inc. ................................................................... 161,250
20,000 Sigma-Aldrich Corp. ........................................................................... 970,000
-----------------
1,131,250
-----------------
Specialty Retailers 3.6%
10,000 Home Depot, Inc. .............................................................................. 398,750
108,000 a Toys R Us, Inc. ............................................................................... 2,916,000
-----------------
3,314,750
-----------------
Telecommunications 14.1%
10,000 a AirTouch Communications........................................................................ 306,250
25,000 AT&T Corp. .................................................................................... 1,643,750
10,000 a Grupo Iusacell, SA de C.V., ADR................................................................ 130,000
140,000 Motorola, Inc. ................................................................................ 10,692,500
5,000 Nokia Corp., ADR............................................................................... 348,750
-----------------
13,121,250
-----------------
Transportation .8%
10,000 a AMR Corp. ..................................................................................... 721,250
-----------------
Miscellaneous 1.8%
25,000 Duracell International, Inc. .................................................................. 1,121,875
10,000 a Host Mariott Corp. ............................................................................ 123,750
10,000 The PMI Group, Inc. ........................................................................... 473,750
-----------------
1,719,375
-----------------
Total Common Stocks (Cost $25,092,996) ........................................................ 69,877,925
-----------------
Preferred Stocks .2%
10,000 News Corp., Ltd., $4.00 pfd., ADR (Cost $166,394) ............................................. 198,750
-----------------
Total Common Stocks and Preferred Stocks (Cost $25,259,390).................................... 70,076,675
-----------------
FACE
AMOUNT Short Term Investments
- ----------
Certificates of Deposit 4.3%
$4,000,000 Societe Generale (NY), 5.72%, 12/12/95 (Cost $4,000,000) ...................................... 3,999,120
-----------------
j Commercial Paper 8.5%
4,000,000 Canadian Imperial Holdings, 5.71%, 01/03/96 ................................................... 3,938,000
4,000,000 Svenska Handelsbanken, Inc., 5.63%, 12/20/95 .................................................. 3,946,920
-----------------
Total Commercial Paper (Cost $7,890,318) 7,884,920
-----------------
Total Investments before Repurchase Agreements (Cost $37,149,708) ............................. 81,960,715
-----------------
k Receivables from Repurchase Agreements 12.0%
3,845,000 UBS Securities, Inc., 6.30%, 10/02/95 (Maturity Value $4,002,100) (Cost $4,000,000)
Collateral: U.S. Treasury Notes, 6.30%, 04/15/96 ............................................. 4,000,000
3,876,000 Nikko Securities Co. International, Inc., 6.42%, 10/02/95 (Maturity Value $4,002,140)
(Cost $4,000,000)
Collateral: U.S. Treasury Notes, 6.42%, 04/30/00 ............................................. 4,000,000
3,195,226l Joint Repurchase Agreement, 6.428%, 10/02/95 (Cost $3,135,167)
Daiwa Securities America, Inc., (Maturity Value $1,539,761)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $1,597,085)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00........................ 3,135,167
-----------------
Total Receivables from Repurchase Agreements (Cost $11,135,167) ............................... 11,135,167
-----------------
Total Investments (Cost $48,284,875) 100.1%.................................................... 93,095,882
Liabilities in Excess of Other Assets, Net(.1%) ............................................... (109,244)
-----------------
Net Assets 100.0% .............................................................................$92,986,638
=================
At September 30, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $48,284,875 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost $45,200,682
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value (389,675)
-----------------
Net unrealized appreciation ...................................................................$44,811,007
=================
aNon-income producing.
jCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
kFace amount for Repurchase Agreements is for the underlying collateral.
lSee Note 1(g) regarding Joint Repurchase Agreement.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Franklin Custodian Funds, Inc., September 30, 1995
VALUE
SHARES Utilities Fund (NOTE1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks 80.8%
<S> <C> <C>
1,236,900 a AirTouch Communications, Inc. ............................................................ $ 37,880,063
3,708,900 Allegheny Power System, Inc. ............................................................. 94,576,950
2,886,100 American Electric Power Co., Inc. ........................................................ 104,981,888
162,000 Ameritech Corp. .......................................................................... 8,444,250
178,600 Bellsouth Corp. .......................................................................... 13,060,125
3,878,000 Central & South West Corp. ............................................................... 98,889,000
10,000 Central Louisiana Electric, Inc. ......................................................... 256,250
2,353,300 CINergy Corp. ............................................................................ 65,598,238
1,306,690 CIPSCO, Inc. ............................................................................. 44,917,469
1,967,800 Delmarva Power & Light Co. ............................................................... 45,013,425
1,853,950 Dominion Resources, Inc. ................................................................. 69,754,869
444,200 DPL, Inc. ................................................................................ 10,272,125
2,472,900 Duke Power Co. ........................................................................... 107,262,038
3,134,000 Entergy Corp. ............................................................................ 81,875,750
2,220,175 Florida Progress Corp. ................................................................... 71,878,166
1,951,000 FPL Group, Inc. .......................................................................... 79,747,125
3,562,000 General Public Utilities Corp. ........................................................... 110,867,250
1,864,100 GTE Corp. ................................................................................ 73,165,925
863,050 Hawaiian Electric Industries, Inc. ....................................................... 32,795,900
22,000 Ipalco Enterprises, Inc. ................................................................. 789,250
36,000 Kansas City Power & Light Co. ............................................................ 850,500
802,200 MidAmerican Energy Co. ................................................................... 12,333,825
28,000 Montana Power Co. ........................................................................ 647,500
661,700 Nevada Power Co. ......................................................................... 14,722,825
2,101,350 New England Electric System............................................................... 77,749,950
1,204,050 New York State Electric & Gas Corp. ...................................................... 31,606,313
1,160,300 NIPSCO Industries, Inc. .................................................................. 40,465,463
3,426,850 Pacific Gas & Electric Co. ............................................................... 102,377,144
172,675 Pacific Telesis Group..................................................................... 5,309,756
2,195,900 PacifiCorp................................................................................ 41,722,100
190,000 Panhandle Eastern Co. .................................................................... 5,177,500
659,300 Pennsylvania Power & Light Co. ........................................................... 15,411,138
668,485 Pinnacle West Capital Corp. .............................................................. 17,547,731
1,389,500 Puget Sound Power & Light Co. ............................................................ 32,305,875
3,125,600 San Diego Gas & Electric Co. ............................................................. 72,279,500
500,000 SBC Communications........................................................................ 27,500,000
3,668,800 SCANA Corp. .............................................................................. 88,051,200
3,861,200 SCEcorp. ................................................................................. 68,536,300
350,000 Sierra Pacific Resources.................................................................. 8,006,250
5,857,000 Southern Co. ............................................................................. 138,371,625
525,110 Southern Indiana Gas & Electric Co. ...................................................... 17,656,824
874,200 Southwestern Public Service Co. .......................................................... 28,520,775
3,922,400 TECO Energy, Inc. ........................................................................ 91,686,100
935,000 Telefonos de Mexico, ADR.................................................................. 29,686,250
2,404,550 Texas Utilities Co. ...................................................................... 83,858,681
358,200 Williams Cos. Inc. ....................................................................... 13,969,800
34,800 Unitil Corp. ............................................................................. 691,650
793,200 Wisconsin Energy Corp. ................................................................... 22,407,900
-----------------
Total Common Stocks (Cost $2,070,922,473)................................................. 2,241,476,531
-----------------
FACE
AMOUNT
- ----------
Corporate Bonds 9.0%
$9,900,000 Alabama Power Co., 8.75%, 12/01/21........................................................ 10,344,222
4,950,000 Alabama Power Co., 8.50%, 05/01/22........................................................ 5,154,762
10,500,000 Arizona Public Service Co., 10.25%, 05/15/20.............................................. 12,057,181
14,500,000 Arizona Public Service Co., 9.00%, 12/15/21............................................... 15,601,202
10,000,000 Cincinnati Gas & Electric Co., 8.50%, 09/01/22............................................ 10,578,490
13,000,000 Commonwealth Edison Co., 9.125%, 01/15/14 ................................................ 13,675,882
2,000,000 Commonwealth Edison Co., 8.875%, 10/01/21 ................................................ 2,099,020
5,000,000 Commonwealth Edison Co., 8.50%, 07/15/22 ................................................. 5,199,339
$ 10,000,000 Commonwealth Edison Co., 8.375%, 09/15/22 ................................................ $ 10,369,569
5,000,000 Duquesne Light Co., 8.375%, 05/15/24 ..................................................... 5,192,770
19,000,000 Enron Corp., 7.00%, 08/15/23 ............................................................. 17,448,782
3,750,000 Gulf States Utilities Co., 9.72%, 07/01/98 ............................................... 3,867,828
11,000,000 c Hidro Electrica Alicuras, 8.375%, 03/15/99 ............................................... 9,886,246
10,000,000 Illinois Power Co., 8.00%, 02/15/23 ...................................................... 10,117,859
15,000,000 Long Island Lighting Co., 9.75%, 05/01/21 ................................................ 15,357,568
10,000,000 Louisiana Power & Light Co., 8.50%, 07/01/22 ............................................. 10,468,669
15,152,052 Midland CoGeneration Venture, 10.33%, 07/23/02 ........................................... 15,805,848
7,500,000 Niagara Mohawk Power Corp., 9.50%, 03/01/21 .............................................. 8,074,657
5,000,000 Niagara Mohawk Power Corp., 8.75%, 04/01/22 .............................................. 5,212,810
8,000,000 Ohio Edison Co., 8.75%, 06/15/22 ......................................................... 8,361,176
20,000,000 Panhandle Eastern Co., 7.20%, 08/15/24.................................................... 18,568,817
15,000,000 Philadelphia Electric Co., 8.75%, 04/01/22................................................ 16,059,148
10,000,000 Texas Utilities Co., 8.75%, 11/01/23 ..................................................... 10,942,910
10,000,000 Texas Utilities Co., 8.50%, 08/01/24...................................................... 10,657,339
-----------------
Total Corporate Bonds (Cost $243,545,307) ................................................ 251,102,094
-----------------
Total Common Stocks and Corporate Bonds (Cost $2,314,467,780)............................. 2,492,578,625
-----------------
jShort Term Investments
Commercial Paper 1.4%
10,000,000 Associates Corp. of North America, 5.69%, 10/10/95 ....................................... 9,982,200
10,000,000 Svenska Handelsbanken, Inc., 5.72%, 10/04/95 ............................................. 9,991,900
5,000,000 Svenska Handelsbanken, Inc., 5.74%, 10/23/95 ............................................. 4,980,650
5,000,000 Svenska Handelsbanken, Inc., 5.75%, 10/23/95 ............................................. 4,980,650
10,000,000 Svenska Handelsbanken, Inc., 5.72%, 10/30/95 ............................................. 9,950,100
-----------------
Total Commercial Paper (Cost $39,899,822) ................................................ 39,885,500
-----------------
Total Investments before Repurchase Agreements (Cost $2,354,367,602) ..................... 2,532,464,125
-----------------
kReceivables from Repurchase Agreements 7.4%
207,928,426l Joint Repurchase Agreement, 6.429%, 10/02/95
Daiwa Securities America, Inc., (Maturity Value $100,203,282)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $103,933,709)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00
Total Receivables from Repurchase Agreements (Cost $204,027,691)...................... 204,027,691
-----------------
Total Investments (Cost $2,558,395,293) 98.6%............................................. 2,736,491,816
-----------------
Other Assets and Liabilities, Net 1.4%.................................................... 37,852,607
Net Assets 100.0%.........................................................................$2,774,344,423
=================
At September 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $2,558,395,293 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost .....................................................$ 271,218,564
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ..................................................... (93,122,041)
-----------------
Net unrealized appreciation............................................................... $ 178,096,523
=================
</TABLE>
aNon-income producing
cSee Note 7 regarding Rule 144A securities.
jCertain short-term securities are traded on a discount basis; the rates
shown are the discount rates at the time of
purchase by the Fund. Other securities bear interest at the rates shown,
payable at fixed dates or upon maturity.
kFace amount for repurchase agreements is for the underlying collateral.
lSee Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Franklin Custodian Funds, Inc., September 30, 1995
SHARES/ VALUE
WARRANTS Income Fund (NOTE1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks 24.3%
Conglomerates
<S> <C> <C>
33,652 a Gillett Holdings, Inc., Class 2 ........................................................ $ 706,692
-----------------
Consumer Products 1.2%
850,000 Philip Morris Cos., Inc. ............................................................... 70,975,000
498,750 a,c Specialty Food Corp. ................................................................... 1,496,250
-----------------
72,471,250
-----------------
Energy .5%
125,000 Atlantic Richfield Co. ................................................................. 13,421,875
400,000 Pennzoil Co. ........................................................................... 17,550,000
-----------------
30,971,875
-----------------
Home Builders .1%
348,978 a NVR, Inc. .............................................................................. 3,402,536
165,744 a Walter Industries, Inc., Class A ....................................................... 2,113,236
-----------------
5,515,772
-----------------
Metals 1.9%
600,000 Driefontein Consolidated Mines, Ltd., ADR .............................................. 8,175,000
2,354,720 Free State Consolidated Gold Mines, Ltd., ADR ......................................... 26,784,940
1,400,000 Hartebeestfontein Gold Mining Co., Ltd., ADR ........................................... 4,312,980
1,089,200 Impala Platinum Holdings, Ltd., ADR .................................................... 26,997,022
460,000 Kinross Mines, Ltd., ADR ............................................................... 5,038,702
811,558 Rustenburg Platinum Holdings, Ltd., ADR ................................................ 17,667,957
187,500 St. Helena Gold Mines, Ltd., ADR ....................................................... 1,593,750
350,000 Samancor, Ltd., ADR .................................................................... 4,856,250
1,040,000 Vaal Reefs Exploration & Mining Co., Ltd., ADR ......................................... 6,825,000
292,000 Western Deep Levels, Ltd., ADR ......................................................... 10,329,500
-----------------
112,581,101
-----------------
Pharmaceuticals 4.0%
825,000 American Home Products Corp. ........................................................... 70,021,875
975,400 Bristol-Myers Squibb Co. ............................................................... 71,082,275
1,073,400 Merck & Co., Inc. ...................................................................... 60,110,400
775,000 Upjohn Co. ............................................................................. 34,584,375
-----------------
235,798,925
-----------------
Real Estate Investment Trust .1%
367,100 Merry Land & Investment Company, Inc. .................................................. 7,754,988
-----------------
Retail .2%
350,633 a Federated Department Stores, Inc. ...................................................... 9,949,211
-----------------
Utilities 16.3%
1,900,000 American Electric Power Co., Inc. ...................................................... 69,112,500
1,800,000 Central & South West Corp. ............................................................. 45,900,000
2,000,000 CINergy Corp. .......................................................................... 55,750,000
1,700,000 Delmarva Power & Light Co. ............................................................. 38,887,500
1,300,000 Dominion Resources, Inc. ............................................................... 48,912,500
700,000 Entergy Corp. .......................................................................... 18,287,500
1,650,000 Florida Progress Corp. ................................................................. 53,418,750
1,400,000 FPL Group, Inc. ........................................................................ 57,225,000
610,000 Hawaiian Electric Industries, Inc. ..................................................... 23,180,000
850,000 Houston Industries, Inc. ............................................................... 37,506,250
1,800,000 Long Island Lighting Co. ............................................................... 31,050,000
825,000 Nevada Power Co. ....................................................................... 18,356,250
600,000 New England Electric System Co. ........................................................ 22,200,000
1,500,000 New York State Electric & Gas Corp. .................................................... 39,375,000
1,750,000 Ohio Edison Co. ........................................................................ 39,812,500
2,760,000 Pacific Gas & Electric Co. ............................................................. 82,455,000
150,000 PacifiCorp ............................................................................. 2,850,000
250,000 Potomac Electric Power Co. ............................................................. 6,062,500
1,050,000 Public Services Enterprise Group, Inc. ................................................. 31,237,500
1,650,000 San Diego Gas & Electric Co. ........................................................... $ 38,156,250
210,000 Scana Corp. ............................................................................ 5,040,000
2,850,000 SCEcorp ................................................................................ 50,587,500
2,350,000 Southern Co. ........................................................................... 55,518,750
1,400,000 Southwestern Public Service Co. ........................................................ 45,675,000
1,600,000 Texas Utilities Co. .................................................................... 55,800,000
-----------------
972,356,250
-----------------
Total Common Stocks (Cost $1,194,340,392) .............................................. 1,448,106,064
-----------------
Preferred Stocks 7.6%
Airlines .3%
500,000 USAir Group, Inc., $4.375 cvt. pfd., Series B .......................................... 17,812,500
-----------------
Apparel/Textiles .1%
150,000 Fieldcrest Cannon, Inc., $3.00 cvt. pfd., Series A ..................................... 7,500,000
50,699 JPS Textile Group, Inc., senior exch. adj. rate pfd., Series A ......................... 1,013,980
-----------------
8,513,980
-----------------
Automotive .2%
404,502 Harvard Industries, Inc., 14.25% pfd., PIK ............................................. 10,264,241
-----------------
Communications .2%
460,000 Nortel, Inc., pfd., Series B............................................................ 8,970,000
-----------------
Consumer Products .5%
75,000 Pantry Pride, Inc., $14.875 pfd., Series B ............................................. 7,800,000
3,000,000 RJR Nabisco Holding Corp., $0.835 cvt. pfd., Series A .................................. 20,250,000
-----------------
28,050,000
-----------------
Energy 3.1%
450,000 Gerrity Oil & Gas Corp., $1.50 cvt. pfd................................................. 4,781,250
650,000 Maxus Energy Corp., $4.00 cum. cvt. pfd. ............................................... 25,837,500
1,050,000 c McDermott International, Inc., $2.875 cvt. pfd., Series C .............................. 41,737,500
750,000 Noble Drilling Corp., $1.50 cvt. pfd. .................................................. 18,000,000
490,000 c Occidental Petroleum Corp., $3.875 cvt. pfd. ........................................... 28,297,500
700,000 c Parker & Parsley Capital, 6.25% cvt. pfd. .............................................. 32,550,000
400,000 Santa Fe Energy Resources, Inc., 7.00% cvt. pfd. ....................................... 7,600,000
2,457,900 Santa Fe Energy Resources, Inc., 8.25% cvt. pfd. ....................................... 24,579,000
163,900 Snyder Oil Corp., $1.50 cvt. exch. pfd. ................................................ 3,257,513
-----------------
186,640,263
-----------------
Metals 2.4%
535,000 Amax Gold, Inc., $3.75 cvt. pfd., Series B ............................................. 26,482,500
283,000 Armco, Inc., $3.625 cum. cvt. pfd., Series A ........................................... 14,662,938
114,200 Armco, Inc., $4.50 cvt. pfd., Series B ................................................. 5,610,075
200,000 Battle Mountain Gold Co., $3.25 cvt. pfd. .............................................. 10,750,000
120,000 Cyprus Minerals, $4.00 cvt. pfd., Series A ............................................. 7,425,000
400,000 Freeport-McMoran, Copper & Gold, Inc., $1.75 cvt. pfd. ................................. 11,000,000
336,900 c Freeport-McMoran, Inc., 4.375% cvt. exch pfd. .......................................... 11,833,613
500,000 Freeport-McMoran, Inc., 8.75% cvt. pfd. ................................................ 33,750,000
375,000 Hecla Mining Co., $3.50 cvt. pfd., Series B............................................. 19,218,750
-----------------
140,732,876
-----------------
Real Estate Investment Trust .4%
1,040,000 Security Capital Pacific Trust, $1.75 cvt. pfd., Series A .............................. 25,090,000
-----------------
Restaurants .4%
1,200,000 Flagstar Cos., $2.25 cvt. pfd., Series A ............................................... 22,050,000
-----------------
Total Preferred Stocks (Cost $460,828,879) ............................................. 448,123,860
-----------------
Partnership Units .2%
500,000 BP Prudhoe Bay Royalty Trust $ 7,812,500
300,000 Freeport-McMoRan Resource, Ltd., depository units ...................................... 5,662,500
59,258a,b,e Zale Corp., Ltd. ....................................................................... 42,074
-----------------
Total Partnership Units (Cost $20,013,167) ............................................. 13,517,074
-----------------
1,281,869 a,b Boardwalk Casino, Inc. ................................................................. 3,690,501
29,143 a NVR, Inc. .............................................................................. 65,572
-----------------
Total Warrants (Cost $2,767,713) ....................................................... 3,756,073
-----------------
Total Common Stocks, Preferred Stocks, Partnership Units and Warrants
(Cost $1,677,950,151) ................................................................. 1,913,503,071
-----------------
FACE
AMOUNT
- ----------
Corporate Bonds 31.1%
Aerospace
$1,350,600 Fairchild Industries, Inc., sub. deb., 9.75%, 04/01/98 ................................. 1,291,511
-----------------
Apparel/Textiles 2.4%
35,000,000 d Bibb Co., senior sub. notes, 14.00%, 10/01/99 .......................................... 14,175,000
40,000,000 Consoltex Group, Inc., senior sub. notes, Series B, 11.00%, 10/01/03 ................... 37,600,000
6,000,000 d Forstmann Textiles, Inc., S.F., senior sub. deb., 14.75%, 04/15/99 ..................... 2,430,000
25,141,000 JPS Textile Group, Inc., S.F., sub. notes, 10.25%, 06/01/99 ............................ 21,495,555
8,390,000 JPS Textile Group, Inc., S.F., sub. notes, 10.85%, 06/01/99 ............................ 7,173,450
30,000,000 JPS Textile Group, Inc., S.F., sub. notes, 7.00%, 05/15/00 ............................. 19,650,000
17,000,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ................................... 16,915,000
25,000,000 Westpoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ............................ 24,437,500
-----------------
143,876,505
-----------------
Automotive .8%
4,000,000 Exide Corp., senior notes, 10.75%, 12/15/02 ............................................ 4,270,000
11,000,000 c Harvard Industries, Inc., senior notes, 11.125%, 08/01/05 .............................. 11,220,000
32,000,000 Motor Wheels Corp., senior notes, Series B, 11.50%, 03/01/00 ........................... 29,440,000
1,971,000 e Pacific International Services Corp., cvt. sub. deb., 10.00%, 09/01/07 ................. 938,196
-----------------
45,868,196
-----------------
Biotechnology .2%
16,500,000 Centocor, Inc., Eurobond cvt. sub. deb., 6.75%, 10/16/01 ............................... 13,282,500
-----------------
Building Products .6%
5,000,000 American Standard, Inc., S.F., senior sub. deb., 9.25%, 12/01/16 ....................... 5,075,000
30,000,000 Inter-City Products Corp. senior notes, 9.75%, 03/01/00 ................................ 25,350,000
3,090,000 Walter Industries, Inc., sub. notes, 12.20%, 03/15/00 .................................. 3,144,075
-----------------
33,569,075
-----------------
Cable Systems 1.8%
2,000,000 Cablevision Industries Corp., senior notes, 10.75%, 01/30/02 ........................... 2,185,000
25,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23 ........................... 26,187,500
30,000,000 Continental Cablevision, Inc., senior sub. deb., 9.50%, 08/01/13 ....................... 31,275,000
35,000,000 Helicon Group LP Corp., senior secured notes, 9.00%, 11/01/03 .......................... 32,812,500
16,000,000 Storer Communication, Inc., sub. deb., 10.00%, 05/15/03 ................................ 16,080,000
-----------------
108,540,000
-----------------
Chemicals 1.3%
29,000,000 Applied Extrusion Technology, senior unsecured notes, 11.50%, 04/01/02 ................. 31,175,000
16,000,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.75%, 06/15/03 ................... 17,360,000
8,900,000 Uniroyal Chemical Co., Inc., senior sub. notes, 10.50%, 05/01/02 ....................... 9,211,500
20,000,000 Uniroyal Chemical Co., Inc., senior sub. notes, 11.00%, 05/01/03 ....................... 20,650,000
-----------------
78,396,500
-----------------
Communications .4%
25,000,000 CommNet Cellular, Inc., sub. notes, 11.25%, 07/01/05 ................................... 25,812,500
-----------------
Computer/Technology .8%
$30,000,000 d Anacomp, Inc., senior sub. notes, 15.00%, 11/01/00 ..................................... $ 22,350,000
18,000,000 Conner Peripheral, Inc., cvt. sub. deb., 6.75%, 03/01/01 ............................... 16,470,000
11,750,000 Maxtor Corp., cvt. sub. deb., 5.75%, 03/01/12 .......................................... 7,358,438
-----------------
46,178,438
-----------------
Conglomerates .2%
5,059,000 Coltec Industries, Inc., S.F., senior sub. deb., 11.25%, 12/01/15 ...................... 5,400,483
4,000,000 Emhart Corp., S.F., senior sub. deb., 9.25%, 08/15/16 .................................. 4,130,000
-----------------
9,530,483
-----------------
Consumer Products 2.1%
8,500,000 c Calmar, Inc., senior sub notes, 11.50%, 08/15/05........................................ 8,616,875
18,000,000 Mafco, Inc., senior sub. deb., 11.875%, 11/15/02 ....................................... 18,270,000
26,000,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03....................... 24,700,000
30,000,000 Revlon Consumer Products Corp., senior sub. notes, Series B, 10.50%, 02/15/03........... 30,600,000
35,000,000 RJR Nabisco, Inc., senior sub. notes, 9.25%, 08/15/13................................... 35,350,000
8,650,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03......................................... 8,650,000
-----------------
126,186,875
-----------------
Energy 3.5%
10,000,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ........................................ 10,425,000
15,000,000 Falcon Drilling, senior sub. notes, 12.50%, 03/15/05 ................................... 15,825,000
40,000,000 Gerrity Oil & Gas Corp., senior sub. notes, 11.75%, 07/15/04 ........................... 37,000,000
19,000,000 Global Marine, Inc., senior secured notes, 12.75%, 12/15/99 ............................ 21,090,000
30,000,000 Mesa Capital Corp., disc. notes, 12.75%, 06/30/98 ...................................... 27,900,000
600,000 Moran Energy, Inc., sub. deb., 11.50%, 05/01/98 ........................................ 600,000
40,000,000 Oryx Energy Co., cvt. sub. deb., 7.50%, 05/15/14 ....................................... 35,600,000
6,835,000 Pogo Producing Co., cvt. sub. deb., 8.00%, 12/31/05 .................................... 6,886,263
8,000,000 c Seacor Holdings, Inc., cvt. sub. deb., 6.00%, 07/01/03 ................................. 8,330,000
30,000,000 Snyder Oil Corp., cvt. sub. notes, 7.00%, 05/15/01 ..................................... 27,375,000
15,000,000 Tesoro Petroleum Corp., S.F., sub. deb., 12.75%, 03/15/01 .............................. 15,150,000
-----------------
206,181,263
-----------------
Food & Beverages 1.5%
2,980,000 Chock Full O'Nuts Corp., S.F., cvt. sub. deb., 8.00%, 09/15/06 ......................... 2,935,300
49,807,000 c Del Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ..................................... 35,612,005
6,600,000 Dr. Pepper Bottling Co., of Texas, senior sub. notes, 10.25%, 02/15/00 ................. 6,913,500
13,000,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03................... 13,260,000
16,000,000 Speciality Foods Corp., senior sub. notes, Series B, 11.25%, 08/15/03 .................. 15,120,000
16,000,000 Speciality Foods Corp., senior unsecured notes, Series B, 10.25%, 08/15/01 ............. 15,120,000
-----------------
88,960,805
-----------------
Food Chains 1.7%
33,000,000 Americold Corp., senior sub. notes, Series B, 11.50%, 03/01/05 ......................... 32,917,500
17,000,000 Brunos, Inc., senior sub. notes, 10.50%, 08/01/05 ...................................... 16,660,000
16,920,000 Grand Union Capital Corp., senior notes, 12.00%, 09/01/04 .............................. 16,327,800
35,000,000 Ralphs Grocery Co., senior sub notes, 11.00%, 06/15/05 ................................. 32,900,000
-----------------
98,805,300
-----------------
Gaming & Hotels 1.9%
35,000,000 Aztar Corp., senior sub. notes, 11.00%, 10/01/02........................................ 33,512,500
40,000,000 b,e Boardwalk Casino Inc., First Mortgage Bonds, 16.50%, 03/31/05 .......................... 37,356,145
10,000,000 Harrah's Jazz, first mortgage, 14.25%, 11/15/01 ........................................ 9,450,000
34,000,000 c Rio Hotel & Casino, Inc., senior sub notes, 10.625%, 07/15/05 .......................... 32,725,000
-----------------
113,043,645
-----------------
Health Care .9%
8,100,000 Grancare, Inc., cvt. sub. deb., 6.50%, 01/15/03 ........................................ 7,543,125
16,500,000 c Medical Care International, Inc., cvt. sub. deb., 6.75%, 10/01/06 ...................... 16,252,500
Health Care (cont.)
$ 16,300,000 OrNda Healthcorp., Inc., senior sub. notes, 12.25%, 05/15/02 ........................... $ 18,011,500
10,000,000 Sola Group, Ltd., senior sub. notes, 6.00%, 12/15/03 ................................... 9,250,000
-----------------
51,057,125
-----------------
Industrial Products 1.6%
15,000,000 Nortek, Inc., senior sub. notes, 9.875%, 03/01/04 ...................................... 13,687,500
30,000,000 Pace Industries, Inc., senior notes, Series B, 10.625%, 12/01/02 ....................... 28,050,000
30,000,000 RHI Holdings, Inc., senior sub. deb., 11.875%, 03/01/99 ................................ 29,100,000
14,500,000 Thermadyne Industries, Inc., notes, 10.75%, 11/01/03.................................... 14,427,500
7,393,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ............................ 7,429,965
-----------------
92,694,965
-----------------
Media & Broadcasting .3%
12,250,000 c Benedek Broadcasting, senior notes, 11.875%, 03/01/05 .................................. 12,908,438
4,034,050 Time Warner, Inc., cvt. sub. deb., 8.75%, 01/10/15 ..................................... 4,215,582
2,300,000 Time Warner, Inc., S.F., sub. deb., 8.75%, 04/01/17 .................................... 2,346,000
-----------------
19,470,020
-----------------
Metals 1.5%
7,000,000 Armco Steel, Inc., senior notes, 11.375%, 10/15/99 ..................................... 7,280,000
5,000,000 Armco Steel, Inc., senior notes, 9.375%, 11/01/00 ...................................... 4,950,000
900,000 Coeur D' Alene Mines Corp., cvt. senior sub. deb., 6.00%, 06/10/02 ..................... 855,000
20,000,000 Coeur D' Alene Mines Corp., cvt. sub. deb., 6.375%, 01/31/04 ........................... 19,575,000
13,420,000 FMC Corp., Eurobonds cvt., senior sub. deb., 6.75%, 01/16/05 ........................... 12,480,600
30,000,000 Jorgensen Earle M. Co., senior notes, 10.75%, 03/01/00 ................................. 29,850,000
12,000,000 Republic Engineered Steel Co., first mortgage, 9.875%, 12/15/01 ........................ 11,220,000
4,805,000 UCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05 ........................... 5,477,700
-----------------
91,688,300
-----------------
Pollution Control .3%
21,000,000 Air & Water Technology Corp., cvt. sub. deb., 8.00%, 05/15/15 .......................... 17,797,500
-----------------
Publishing .2%
12,500,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 ................................. 13,312,500
-----------------
Railroads .7%
500,000 Missouri Pacific Railroad Co., gen. mortgage, Series A, 4.75%, 01/01/20 ................ 298,686
500,000 Missouri Pacific Railroad Co., gen. mortgage, Series B, 4.75%, 01/01/30 ................ 288,969
1,200,000 Missouri Pacific Railroad Co., income deb., 5.00%, 01/01/45 ............................ 684,000
37,500,000 Southern Pacific Rail Corp., senior notes, 9.375%, 08/15/05 ............................ 40,734,375
-----------------
42,006,030
-----------------
Real Estate Development .3%
20,000,000 Rouse Co., cvt. sub. deb., 5.75%, 07/23/02 ............................................. 19,000,000
-----------------
Restaurants 1.0%
40,000,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ............................... 30,900,000
30,000,000 Foodmaker, Inc., senior sub. notes, 14.25%, 05/15/98 ................................... 30,600,000
-----------------
61,500,000
-----------------
Retail .9%
14,000,000 Carter Hawley Hale Stores, cvt. senior sub. notes, 6.25%, 12/31/00 ..................... 13,702,500
9,000,000 Drug Emporium, Inc., cvt. sub. deb., 7.75%, 10/01/14.................................... 7,177,500
35,000,000 Levitz Furniture Co., senior sub. notes, 12.375%, 04/15/97 ............................. 35,000,000
-----------------
55,880,000
-----------------
Transportation .2%
10,000,000 AMR Corp., cvt. sub. deb., 6.125%, 11/01/24 ............................................ 10,175,000
-----------------
Utilities 4.0%
975,837,500 i ESCOM, E168, utility deb., (South Africa), 11.00%, 06/01/08 ............................ 205,295,313
8,040,910 Midland CoGeneration Venture, deb. notes, Series C-91, 10.33%, 07/23/02 ................ 8,387,867
Utilities (cont.)
$15,584,968 Midland CoGeneration Venture, S.F., sub. deb., Series C, 10.33%, 07/23/02 .............. $ 16,257,443
6,000,000 Texas-New Mexico Power Co., secured deb., 10.75%, 09/15/03 ............................. 6,349,613
-----------------
236,290,236
-----------------
Total Corporate Bonds (Cost $1,871,965,113) ............................................ 1,850,395,272
-----------------
U.S. Government Securities 3.1%
50,000,000 U.S. Treasury Bonds, 7.125%, 02/15/23 .................................................. 53,046,845
128,000,000 U.S. Treasury Notes, 6.00%-6.375%, 12/31/97 - 08/15/02 ................................. 129,711,864
-----------------
Total U.S. Government Securities (Cost $178,433,233) ................................... 182,758,709
Foreign Government Securities 7.1%
50,000,000 i Government of Canada, first coupon deb., 8.00%, 06/01/23 ............................... 36,449,885
520,000,000 Republic of Argentina, floating rate notes, 5.00%, 03/31/23 ............................ 252,525,000
48,687,500 Republic of Brazil, floating rate notes, Series A, 6.687%, 01/01/01 .................... 41,293,086
130,000,000 i Republic of South Africa, 12.00%, 02/28/05 ............................................. 29,912,050
102,000,000 United Mexican States, Series B, 6.25%, 12/31/19 ....................................... 62,220,000
-----------------
Total Foreign Government Securities (Cost $414,919,531) ................................ 422,400,021
-----------------
h Zero Coupon/Step-Up Bonds 3.0%
65,000,000 Bell & Howell Co., senior deb., zero coupon to 03/01/00,
(original accretion rate 11.50%), 11.50%,
thereafter, 03/01/05 .................................................................. 40,625,000
11,000,000 Dr. Pepper Bottling Holdings Co., S.F., senior sub. disc.
notes, zero coupon to 02/15/98, (original accretion rate
11.625%), 11.625% thereafter, 02/15/03 ............................................... 8,305,000
25,552,000 Dr. Pepper /Seven-Up Cos., senior sub. notes, zero coupon
to 11/01/97, (original accretion rate 11.50%),
11.50% thereafter, 11/01/02 .......................................................... 22,996,800
9,000,000 Exide Corp., senior sub. deb., zero coupon to 12/15/97,
(original accretion rate 12.25%), 12.25%
thereafter, 12/15/04 .................................................................. 7,335,000
7,000,000 L.F.C. Holding, senior deb., zero coupon to 06/15/97, (original accretion
rate 15.00%), 15.00 %
thereafter, 06/15/02 .................................................................. 5,318,040
65,750,000 c Marcus Cable Co., senior disc. notes, zero coupon to 6/15/00,
(original accretion rate 14.25%),
14.25% thereafter, 12/15/05 ........................................................... 38,463,750
40,000,000 Revlon Worldwide Corp., senior secured disc. notes, Series B,
(original accretion rate 12.00%), 0.00%, 03/15/98....................................... 29,400,000
33,250,000 Speciality Foods Corp., senior secured disc. deb., Series B, zero coupon
to 08/15/99, (original accretion
rate 13.00%), 13.00% thereafter, 08/15/05 ............................................. 16,126,250
12,000,000 Uniroyal Chemical Co., Inc., senior notes, zero coupon to 05/01/98,
(original accretion rate 12.00%), 12.00% thereafter, 05/01/05 .......................... 9,060,000
-----------------
Total Zero Coupon/Step-Up Bonds (Cost $173,441,815) .................................... 177,629,840
-----------------
Total Long Term Investments (Cost $4,316,709,843) ...................................... 4,546,686,913
-----------------
j Short Term Investments
Certificates of Deposit .3%
20,000,000 Societe Generale, Inc., New York Branch, 5.72% - 5.77%,
10/03/95 - 12/12/95 (Cost $19,999,994) 19,997,800
-----------------
Commercial Paper 5.0%
20,000,000 American Express Credit Corp., 5.67%, 12/22/95 ......................................... 19,728,200
20,000,000 Associate Corp. of North America, 5.69%, 10/10/95 ...................................... 19,964,400
10,000,000 Canadian Imperial Holdings, Inc., 5.65%, 12/26/95 ...................................... 9,857,800
20,000,000 Prudential Funding Corp., 5.70%, 11/06/95 .............................................. 19,877,800
200,000,000 Svenska Handelsbanken, Inc., 5.63%, - 5.75%, 10/03/95 - 12/29/95 ....................... 198,721,800
30,000,000 Westpac Banking Corp., 5.70%, 11/07/95 - 11/10/95 ...................................... 29,802,300
----------------
Total Commercial Paper (Cost $ 298,091,497) ............................................ 297,952,300
-----------------
h,i Zero Coupon Bonds 1.7%
Mexican Federal Treasury Certificates (CETES),
108,900,000 41.30%, 10/05/95 ...................................................................... 16,973,209
77,500,000 40.75%, 10/11/95 ...................................................................... 12,011,528
145,000,000 13.86%, 10/19/95 ...................................................................... 22,305,682
168,350,000 14.75%, 10/26/95 ...................................................................... 25,728,788
32,000,000 34.85%, 11/09/95 ...................................................................... 4,827,235
57,245,000 14.33%, 11/16/95 ...................................................................... 8,579,483
81,600,000 34.75%, 12/07/95 ...................................................................... 11,994,305
-----------------
Total Zero Coupon Bonds (Cost $125,787,285) ............................................ 102,420,230
-----------------
Total Investments before Repurchase Agreements (Cost $4,760,588,619) ................... 4,967,057,243
-----------------
k,l Receivables from Repurchase Agreements 15.2%............................................
$921,885,917 Joint Repurchase Agreement, 6.429% 10/02/95 (Cost $ 904,595,469)
Daiwa Securities America, Inc., (Maturity Value $444,270,258)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $460,809,813)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00.................... $ 904,595,469
-----------------
Total Investments (Cost $5,665,184,088) 98.7% .......................................... 5,871,652,712
-----------------
Other Assets and Liabilities, Net 1.3% ................................................. 79,957,645
-----------------
Net Assets 100.00% .....................................................................$5,951,610,357
=================
At September 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $5,665,184,088 was as
follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ............................................. $ 368,447,585
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ............................................. (161,978,961)
-----------------
Net unrealized appreciation ............................................................ $ 206,468,624
=================
PORTFOLIO ABBREVIATIONS:
PIK -Payment-in-Kind
S.F. -Sinking Fund
aNon-Income Producing.
bSee Note 6 regarding restricted securities.
cSee Note 7 regarding Rule 144A securities.
dSee Note 9 regarding defaulted securities.
eSee Note 1(a) regarding securities valued by the Board of Directors.
hZero coupon bonds. The current effective yield may vary. The original accretion rate will remain constant.
iFace amount stated in foreign currencies, value in U.S. dollars.
jCertain short-term securities are traded on a discount basis; the rates shown are the discount rates at the time of
purchase by the Fund. Other securities bear interest at the rates shown, payable at fixed dates or upon maturity.
kFace amount for repurchase agreements is for the underlying collateral.
lSee Note 1(g) regarding Joint Repurchase Agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS
Franklin Custodian Funds, Inc., September 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT U.S. Government Securities Fund (NOTE1)
- ---------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) 97.2%
<S> <C> <C>
$24,063,273 GNMA I, SF, 6.00%, 09/15/23 - 11/15/23 ................................................. $ 22,634,465
1,266,739,790 GNMA I, SF, 6.50%, 03/15/03 - 03/15/24 ................................................. 1,222,401,192
32,335,143 GNMA PL, 6.50%, 05/15/24 ............................................................... 30,475,804
3,000,000 GNMA II, 6.50%, 09/20/25 ............................................................... 2,872,494
36,570,260 GNMA PL, 6.75%, 01/15/34 ............................................................... 34,901,664
2,298,494,976 GNMA I, SF, 7.00%, 04/15/16 - 07/15/25 ................................................. 2,272,631,998
49,475,499 GNMA II, 7.00%, 07/20/25 - 09/20/25 .................................................... 48,609,572
9,055,600 GNMA PL, 7.00%, 09/15/35 ............................................................... 8,749,954
35,692,289 GNMA PL, 7.375%, 04/15/29 .............................................................. 35,064,782
21,347,701 GNMA PL, 7.425%, 07/15/29............................................................... 21,018,433
1,730,098,507 GNMA I, SF, 7.50%, 06/15/05 - 08/15/25 ................................................. 1,747,935,660
218,109,859 GNMA II, 7.50%, 10/20/22 - 07/20/25 .................................................... 219,131,683
5,915,499 GNMA PL, 7.75%, 10/15/12 ............................................................... 5,899,768
1,540,903,441 GNMA I, SF, 8.00%, 10/15/07 - 06/15/25 ................................................. 1,586,164,189
28,929,335 GNMA II, 8.00%, 08/20/16 - 03/20/19 .................................................... 29,670,587
48,263,883 GNMA PL, 8.00%, 04/15/22 - 07/15/23 .................................................... 48,595,594
9,642,930 GNMA I, GPM, 8.25%, 03/15/17 - 11/15/17 ................................................ 9,951,735
24,959,551 GNMA PL, 8.25%, 12/15/20 - 02/15/28 .................................................... 25,290,862
418,688,137 GNMA I, SF, 8.50%, 05/15/16 - 06/15/24 ................................................. 436,610,029
80,046,414 GNMA II, 8.50%, 04/20/16 - 06/20/25 .................................................... 82,972,501
1,814,527 GNMA I, GPM, 8.75%, 03/20/17 - 07/20/17 ................................................ 1,886,244
548,349,551 GNMA I, SF, 9.00%, 10/15/04 - 07/15/23 ................................................. 577,819,490
19,465,551 GNMA II, 9.00%, 02/20/20 - 11/20/21 .................................................... 20,353,530
7,817,510 GNMA I, GPM, 9.25%, 05/15/16 - 01/15/17 ................................................ 8,252,305
308,617,106 GNMA I, SF, 9.50%, 05/15/09 - 02/15/23 ................................................. 329,832,366
15,085,286 GNMA II, 9.50%, 09/20/15 - 10/20/21 .................................................... 15,952,584
9,438,979 GNMA I, GPM, 10.00%, 11/15/09 - 11/15/13 ............................................... 10,241,292
364,969,704 GNMA I, SF, 10.00%, 04/15/12 - 03/15/25 ................................................ 398,273,190
50,914,738 GNMA II, 10.00%, 08/20/13 - 03/20/21 ................................................... 54,860,630
8,365,387 GNMA I, GPM, 10.25%, 02/15/16 - 02/15/21 ............................................... 9,073,834
277,551,226 GNMA I, SF, 10.50%, 08/15/00 - 10/15/21 ................................................ 306,081,050
76,608,874 GNMA II, 10.50%, 09/20/13 - 03/20/21 ................................................... 83,264,270
18,890,636 GNMA I, GPM, 11.00%, 12/15/09 - 03/15/11 ............................................... 20,909,573
230,776,387 GNMA I, SF, 11.00%, 01/15/01 - 05/15/21 ................................................ 257,748,378
22,930,605 GNMA II, 11.00%, 07/20/13 - 01/20/21 ................................................... 25,209,334
9,325,593 GNMA I, GPM, 11.25%, 06/15/13 - 01/15/16 ............................................... 10,399,490
3,757,211 GNMA I, GPM, 11.50%, 03/15/10 - 01/20/14 ............................................... 4,192,814
48,338,146 GNMA I, SF, 11.50%, 02/15/13 - 12/15/17 ................................................ 54,788,289
3,329,194 GNMA II, 11.50%, 08/20/13 - 04/20/18.................................................... 3,706,851
2,268,649 GNMA I, GPM, 11.75%, 07/15/13 - 12/15/15 ............................................... 2,556,130
1,023,708 GNMA I, GPM, 12.00%, 10/15/10 - 03/15/13 ............................................... 1,159,350
223,194,518 GNMA I, SF, 12.00%, 05/15/11 - 08/15/19 ................................................ 255,557,723
10,141,357 GNMA II, 12.00%, 09/20/13 - 02/20/16 ................................................... 11,409,027
1,577,044 GNMA I, GPM, 12.50%, 04/15/10 - 10/15/12 ............................................... 1,806,209
192,903,294 GNMA I, SF, 12.50%, 01/15/10 - 08/15/18................................................. 223,345,933
8,890,534 GNMA II, 12.50%, 09/20/13 - 11/20/15.................................................... 10,115,765
212,219 GNMA I, GPM, 12.75%, 11/15/13 - 06/15/15 ............................................... 243,853
174,263,467 GNMA I, SF, 13.00%, 07/15/10 - 01/15/16 ................................................ 203,071,476
5,469,978 GNMA II, 13.00%, 09/20/13 - 09/20/15 ................................................... 6,264,838
-----------------
Total Government National Mortgage Association (GNMA) (Cost $10,721,975,003) ............ 10,799,958,784
-----------------
jShort Term Investments 2.3%
256,860,000 U.S. Treasury Bills, 5.325% - 6.270%, 10/05/95 - 03/07/96 (Cost $254,282,067) ............ 254,338,011
-----------------
Total Investments (Cost $10,976,257,070) 99.5% ........................................ 11,054,296,795
Other Assets and Liabilities, Net .5% ................................................. 59,003,077
-----------------
Net Assets 100.0% .....................................................................$11,113,299,872
=================
At September 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $10,976,257,070 was as
follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ........................................... $ 174,079,818
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ............................................ (96,040,093)
-----------------
Net unrealized appreciation ............................................................ $ 78,039,725
=================
PORTFOLIO ABBREVIATIONS:
GPM - Graduated Payment Mortgage
PL - Project Loan
SF - Single Family
I - Original SF Program
II - Programs consisting of different types of mortgages
jCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of the purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
Franklin Custodian Funds, Inc.
Statements of Assets and Liabilities
September 30, 1995
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost......................... $393,355,492 $37,149,708 $2,354,367,602 $4,760,588,619 $10,976,257,070
============ ========== ============== ============= ==============
At value................................... 678,280,818 81,960,715 2,532,464,125 4,967,057,243 11,054,296,795
Receivables from repurchase agreements,
at value and cost........................... 38,281,016 11,135,167 204,027,691 904,595,469 --
Cash........................................ 138,801 740 7,018 5,248,606 21,194
Receivables:
Dividends and interest..................... 843,889 70,353 16,746,891 83,773,129 68,847,792
Investment securities sold................. -- -- 23,820,989 67,151 --
Capital shares sold........................ 344,791 74,238 2,750,758 10,964,251 4,697,117
------------ ---------- ------------- ------------- --------------
Total assets........................... 717,889,315 93,241,213 2,779,817,472 5,971,705,849 11,127,862,898
------------ ---------- ------------- ------------- --------------
Liabilities:
Payables:
Investment securities purchased............ -- -- 166,643 14,403,221 --
Capital shares repurchased................. 213,335 155,952 3,367,061 1,294,522 7,394,284
Management fees............................ 289,794 48,482 1,061,596 2,251,455 4,180,089
Distribution fees.......................... 234,610 29,300 541,130 1,294,122 1,490,950
Shareholder servicing costs................ 70,800 10,675 204,510 344,000 590,000
Accrued expenses and other liabilities...... 54,682 10,166 132,109 508,172 907,703
------------ ---------- ------------- ------------- --------------
Total liabilities...................... 863,221 254,575 5,473,049 20,095,492 14,563,026
------------ ---------- ------------- ------------- --------------
Net assets, at value......................... $717,026,094 $92,986,638 $2,774,344,423 $5,951,610,357 $11,113,299,872
============ ========== ============== ============= ==============
Net assets consist of:
Undistributed net investment income......... $ 6,336,281 $ 845,843 $ 7,091,302 $ 1,820,982 $ 24,585,885
Unrealized appreciation on investments and
translation of assets and liabilities denominated in
foreign currencies.......................... 284,925,326 44,811,007 178,096,523 206,545,345 78,039,725
Net realized gain (loss) from investments
and foreign currency transactions .......... 2,390,493 1,652,070 19,981,831 69,953,906 (670,588,875)
Class I capital shares...................... 367,887 72,741 2,836,635 25,566,528 16,156,839
Class II capital shares..................... 2,153 -- 8,588 285,812 17,072
Additional paid-in capital.................. 423,003,954 45,604,977 2,566,329,544 5,647,437,784 11,665,089,226
------------ ---------- ------------- ------------- --------------
Net assets, at value......................... $717,026,094 $92,986,638 $2,774,344,423 $5,951,610,357 $11,113,299,872
============ ========== ============== ============= ==============
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS
(continued)
Franklin Custodian Funds, Inc.
Statements of Assets and Liabilities (cont.)
September 30, 1995
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
-------- -------- ---------- ---------- ----------
Class I shares:
<S> <C> <C> <C> <C> <C>
Net assets, at value........................ $712,865,540 $92,986,638 $2,765,975,593 $5,885,788,106 $11,101,605,226
============ ========== ============== ============= ==============
Shares outstanding.......................... 36,788,747 7,274,083 283,663,463 2,556,652,794 1,615,683,903
============ ========== ============== ============= ==============
Net asset value per share*.................. $19.38 $12.78 $ 9.75 $2.30 $6.87
============ ========== ============== ============= ==============
Maximum offering price per share
(100/95.5, 100/95.5, 100/95.75, 100/95.75, 100/95.75
of net asset value per share, respectively). $20.29 $13.38 $10.18 $2.40 $7.17
============ ========== ============== ============= ==============
Class II shares:
Net assets, at value........................ $ 4,160,554 -- $ 8,368,830 $ 65,822,251 $ 11,694,646
============ ========== ============== ============= ==============
Shares outstanding.......................... 215,274 -- 858,757 28,581,175 1,707,173
============ ========== ============== ============= ==============
Net asset value per share*.................. $19.33 -- $ 9.75 $2.30 $6.85
============ ========== ============== ============= ==============
Maximum offering price per share
(100/99 of net asset value per share)....... $19.53 -- $ 9.85 $2.32 $6.92
============ ========== ============== ============= ==============
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
(continued)
Franklin Custodian Funds, Inc.
Statements of Operations
for the year ended September 30, 1995
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
-------- -------- --------- --------- ----------
Investment income:
<S> <C> <C> <C> <C> <C>
Dividends...................................... $ 10,686,837 $ 357,113 $140,974,426 $126,530,779 $ --
Interest (Note 1).............................. 981,675 1,277,096 32,964,817 339,513,933 904,126,288
-------- -------- --------- --------- ----------
Total income.............................. 11,668,512 1,634,209 173,939,243 466,044,712 904,126,288
-------- -------- --------- --------- ----------
Expenses:
Management fees (Note 5)....................... 2,969,094 491,673 12,223,592 23,887,430 50,269,876
Distribution fees Class I (Note 5) ............ 1,147,410 136,778 3,155,687 6,629,104 8,043,149
Distribution fees Class II (Note 5)............ 7,073 -- 10,526 71,000 12,518
Shareholder servicing costs (Note 5) .......... 569,386 84,821 1,734,621 2,376,752 4,142,650
Reports to shareholders........................ 471,719 31,102 1,557,748 2,171,765 3,462,658
Custodian fees................................. 54,750 7,283 247,060 1,181,900 987,831
Registration and filing fees................... 39,214 12,700 39,341 186,102 115,427
Professional fees.............................. 18,203 6,924 73,619 174,399 232,024
Directors' fees and expenses (Note 5).......... 3,518 730 14,694 28,422 59,143
Other.......................................... 22,803 5,288 81,028 185,450 257,457
-------- -------- --------- --------- ----------
Total expenses............................ 5,303,170 777,299 19,137,916 36,892,324 67,582,733
-------- -------- --------- --------- ----------
Net investment income................. 6,365,342 856,910 154,801,327 429,152,388 836,543,555
-------- -------- --------- --------- ----------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments.................................. 2,390,493 1,652,070 19,981,831 32,612,147 (57,944,614)
Foreign currency transactions................ -- -- -- 1,655,436 --
Net unrealized appreciation (depreciation) on:
Investments.................................. 156,404,122 19,366,149 398,271,409 247,991,258 636,365,221
Translation of assets and liabilities
denominated in foreign currency................ -- -- -- (296,335) --
-------- -------- --------- --------- ----------
Net realized and unrealized gain from
investments and foreign currencies............. 158,794,615 21,018,219 418,253,240 281,962,506 578,420,607
-------- -------- --------- --------- ----------
Net increase in net assets resulting
from operations $165,159,957 $21,875,129 $573,054,567 $711,114,894 $1,414,964,162
======== ======== ========= ========= ==========
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENTS
(continued)
Franklin Custodian Funds, Inc.
Statements of Changes in Net Assets
for the years ended September 30, 1995 and 1994
Growth Fund DynaTech Fund Utilities Fund
------------------- ------------------ ---------------------
1995 1994 1995 1994 1995 1994
--------- --------- -------- -------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ............... $ 6,365,342 $ 6,640,300 $ 856,910 $ 469,253 $ 154,801,327 $ 177,611,864
Net realized gain from investments and
foreign currency transactions ....... 2,390,493 1,478,440 1,652,070 896,402 19,981,831 1,912,217
Net unrealized appreciation (depreciation)
on investments and translation of
assets and liabilities denominated in
foreign currencies................... 156,404,122 32,965,685 19,366,149 522,124 398,271,409 (812,037,414)
--------- --------- -------- -------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations............ 165,159,957 41,084,425 21,875,129 1,887,779 573,054,567 (632,513,333)
Distributions to shareholders from:
Undistributed net investment income:
Class I............................... (4,752,106) (11,372,383) (337,856) (858,495) (154,359,654) (170,878,877)
Class II.............................. -- -- -- -- (100,164) --
Net realized capital gains:
Class I............................. (1,478,440) (3,114,515) (896,402) (4,124,934) (1,914,525) (13,407,885)
Increase (decrease) in net
assets from capital
share transactions (Note 2).......... 41,477,162 (70,801,740) 4,933,183 (960,790) (214,844,085) (237,465,899)
--------- --------- -------- -------- ---------- ----------
Net increase (decrease) in net assets 200,406,573 (44,204,213) 25,574,054 (4,056,440) 201,836,139 (1,054,265,994)
Net assets:
Beginning of year.................... 516,619,521 560,823,734 67,412,584 71,469,024 2,572,508,284 3,626,774,278
--------- --------- -------- -------- ---------- ----------
End of year.......................... $717,026,094 $516,619,521 $92,986,638 $67,412,584$2,774,344,423 $2,572,508,284
========= ========= ======== ======== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year................... $ 4,733,342 $ 9,465,425 $ 326,789 $ 716,031 $ 6,749,793 $ 16,806
========= ========= ======== ======== ========== ==========
End of year......................... $ 6,336,281 $ 4,733,342 $ 845,843 $ 326,789 $ 7,091,302 $ 6,749,793
========= ========= ======== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
(continued)
Franklin Custodian Funds, Inc.
Statements of Changes in Net Assets (cont.)
for the years ended September 30, 1995 and 1994
Income Fund U.S. Government Securities Fund
--------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income..................................... $ 429,152,388 $ 330,686,148 $ 836,543,555 $ 966,419,067
Net realized gain (loss) from investments and
foreign currency transactions ............................ 34,267,583 55,974,567 (57,944,614) (111,364,839)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated
in foreign currencies..................................... 247,694,923 (449,635,348) 636,365,221 (1,196,683,846)
---------- ---------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 711,114,894 (62,974,633) 1,414,964,162 (341,629,618)
Distributions to shareholders from:
Undistributed net investment income:
Class I................................................... (424,364,184) (343,424,035) (818,027,564) (983,276,666)
Class II................................................... (658,851) -- (102,491) --
Net realized capital gains:
Class I.................................................... (62,309,280) (48,228,616) -- --
Increase (decrease) in net assets from
capital share transactions
(Note 2).................................................. 836,323,234 1,410,687,943 (1,152,281,674) (1,274,862,037)
---------- ---------- ----------- -----------
Net increase (decrease) in net assets................ 1,060,105,813 956,060,659 (555,447,567) (2,599,768,321)
Net assets:
Beginning of year......................................... 4,891,504,544 3,935,443,885 11,668,747,439 14,268,515,760
---------- ---------- ----------- -----------
End of year...............................................$5,951,610,357 $4,891,504,544$11,113,299,872 $11,668,747,439
========== ========== =========== ===========
Undistributed net investment income included in net assets:
Beginning of year......................................... $ 8,679,566 $ 42,309,475 $ 6,172,385 $ 22,809,371
========== ========== =========== ===========
End of year............................................... $ 1,820,982 $ 8,679,566 $ 24,585,885 $ 6,172,385
========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
Franklin Custodian Funds, Inc.
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Custodian Funds, Inc. (the Corporation) is an open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940 as amended. The Corporation's shares are offered in five
different Series (the Funds) with each Fund, in effect, representing a separate
fund and each of the Funds maintaining a totally separate investment portfolio.
Each Fund, except the DynaTech fund, offers two classes of shares, Class I and
Class II. Class I shares are sold with a higher front-end sales charge than
Class II. Each class of shares may be subject to a contingent deferred sales
charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuations:
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. Other securities
for which market quotations are readily available are valued at current market
values, obtained from pricing services, which are based on a variety of factors,
including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific securities. Portfolio securities which are traded both in the
over-the-counter market and on a securities exchange are valued according to the
broadest and most representative market as determined by the Manager. Securities
for which market quotations are not available, if any, are valued in accordance
with procedures established by the Board of Directors.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and that value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and ask prices
is used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events which
materially affect the value of these foreign securities occur during such
period, then these securities will be valued in accordance with procedures
established by the Board of Directors
The fair values of securities restricted as to resale, if any, are determined
following procedures approved by the Board of Directors.
b. Income Taxes:
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to their shareholders which will be sufficient to
relieve them from income and excise taxes. Therefore, no income tax provision is
required. Each Fund is treated as a separate entity in the determination of
compliance with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
d. Investment Income, Expenses and Distributions:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount is amortized as required by the Internal Revenue Code.
Net investment income differs for financial statement and income tax purposes
primarily due to differing treatments of defaulted securities -- see Note 9.
e. Expense Allocation:
Common expenses incurred by the Corporation are allocated among the Funds based
on the ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Foreign Currency Translation
The accounting records of the Funds are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of such currencies against U.S. dollars on the
date of the valuation. Purchases and sales of securities, income and expenses
are translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are recognized when reported by the custodian
bank.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade date and settlement dates on securities
transactions, the difference between the amounts of dividends and interest, and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
appreciation/depreciation on translation of assets and liabilities denominated
in foreign currencies arise from changes in the value of assets and liabilities
other than investments in securities at fiscal year end, resulting from changes
in exchange rates.
g. Repurchase Agreements
All Funds, except the U.S. Government Securities Fund, may enter into a Joint
Repurchase Agreement whereby their uninvested cash balance is deposited into a
joint cash account to be used to invest in one or more repurchase agreements
with government securities dealers recognized by the Federal Reserve Board
and/or member banks of the Federal Reserve System. The value and face amount of
the Joint Repurchase Agreement are allocated to the Funds based on their
pro-rata interest.
In a repurchase agreement, the Funds purchase a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Fund to the
seller, collateralized by the underlying security. The transaction requires the
initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Fund's custodian and held until resold to the
dealer or bank. At September 30, 1995, all outstanding joint repurchase
agreements held by the Funds had been entered into on September 29, 1995.
2. CAPITAL STOCK
At September 30, 1995, there were 14 billion shares of capital stock authorized.
The shares of $.01 par value capital stock were allocated to the Funds as
follows:
<TABLE>
<CAPTION>
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Class I ........................................... 250,000,000 250,000,000 400,000,000 3,600,000,000 2,500,000,000
======== ======== ======== ========= =========
Class II .......................................... 250,000,000 250,000,000 400,000,000 3,600,000,000 2,500,000,000
======== ======== ======== ========= =========
Transactions in each of the Fund's shares for the year ended September 30, 1995
and 1994 were as follows:
Growth Fund DynaTech Fund Utilities Fund
------------------ ----------------- -------------------
Shares Amount Shares Amount Shares Amount
------- --------- ------- -------- -------- ---------
Class I Shares:
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 3,259,862 $ 54,830,749 556,551 $ 6,325,495 23,438,241 $207,671,765
Shares issued in reinvestment
of distributions 376,366 5,532,585 109,288 1,078,651 12,895,110 114,654,996
Shares redeemed.............................(2,819,991) (47,831,734) (588,934) (6,442,793)(52,637,479)(466,443,954)
Changes from exercise of exchange privilege:
Shares sold................................ 4,881,545 81,151,770 2,157,251 24,440,808 21,150,967 185,003,891
Shares redeemed............................(3,436,761) (56,161,539)(1,806,801) (20,468,978)(30,053,595)(263,692,855)
------- --------- ------- -------- -------- ---------
Net increase (decrease).................... 2,261,021 $ 37,521,831 427,355 $ 4,933,183 (25,206,756)$(222,806,157)
======= ========= ======= ======== ======== =========
2. CAPITAL STOCK (cont.)
Growth Fund DynaTech Fund Utilities Fund
------------------ ----------------- -------------------
Shares Amount Shares Amount Shares Amount
------- --------- ------- -------- -------- ---------
Class I Shares: (cont.)
1994
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................. 3,594,801 $ 52,149,133 505,692 $ 4,903,527 55,310,086 $531,158,254
Shares issued in connection
with merger (Note 11) -- -- -- -- 1,469,352 12,798,053
Shares issued in reinvestment
of distributions 812,022 11,831,146 449,890 4,296,451 13,733,791 125,487,908
Shares redeemed.............................(6,292,343) (91,797,133) (812,226) (7,855,743)(61,566,757)(568,855,177)
Changes from exercise of exchange privilege:
Shares sold................................ 4,202,629 61,629,923 1,746,294 17,042,460 25,554,670 239,950,636
Shares redeemed............................(7,154,900) (104,614,809)(1,985,867) (19,347,485)(62,057,114)(578,005,573)
------- --------- ------- -------- -------- ---------
Net decrease...............................(4,837,791)$ (70,801,740) (96,217)$ (960,790)(27,555,972)$(237,465,899)
======= ========= ======= ======== ======== =========
Class II Shares:
1995*
Shares sold................................. 224,236 $ 4,116,133 856,265 $ 7,939,688
Shares issued in reinvestment of distributions -- -- 8,744 80,958
Shares redeemed............................. (1,485) (28,535) (3,092) (28,674)
Changes from exercise of exchange privilege:
Shares sold................................ 9,218 169,946 3,642 33,341
Shares redeemed............................ (16,695) (302,213) (6,802) (63,241)
------- --------- -------- ---------
Net increase .............................. 215,274 $ 3,955,331 858,757 $ 7,962,072
======= ========= ======== =========
Income Fund U.S. Government Securities Fund
------------------- --------------------
Shares Amount Shares Amount
-------- ---------- -------- ----------
Class I Shares:
1995
<S> <C> <C> <C> <C>
Shares sold................................................... 438,291,520 $ 958,978,640 54,892,062 $ 365,517,804
Shares issued in reinvestment of distributions................ 135,535,586 293,424,537 54,489,699 359,042,632
Shares redeemed...............................................(279,285,095) (608,287,689)(253,579,592)(1,669,022,779)
Changes from exercise of exchange privilege:
Shares sold.................................................. 144,807,208 315,130,585 24,974,127 164,636,284
Shares redeemed.............................................. (86,012,729) (187,395,071) (58,420,865) (384,072,880)
-------- ---------- -------- ----------
Net increase (decrease)...................................... 353,336,490 $ 771,851,002 (177,644,569)$(1,163,898,939)
======== ========== ======== ==========
1994
Shares sold................................................... 583,148,319 $1,363,903,591 126,955,076 $ 878,791,189
Shares issued in reinvestment of distributions................ 91,810,668 213,563,591 57,290,275 391,863,450
Shares redeemed...............................................(221,776,333) (514,046,627)(293,226,524)(1,997,900,628)
Changes from exercise of exchange privilege:
Shares sold.................................................. 266,632,325 624,897,928 30,365,255 208,267,481
Shares redeemed..............................................(119,137,856) (277,630,540)(110,425,365) (755,883,529)
-------- ---------- -------- ----------
Net increase (decrease)...................................... 600,677,123 $1,410,687,943 (189,041,283)$(1,274,862,037)
======== ========== ======== ==========
*For the period May 1, 1995 to September 30, 1995.
2. CAPITAL STOCK (cont.)
Income Fund U.S. Government Securities Fund
------------------- --------------------
Shares Amount Shares Amount
-------- ---------- -------- ----------
Class II Shares:
1995*
<S> <C> <C> <C> <C>
Shares sold................................................... 28,905,864 $ 65,207,643 1,728,954 $ 11,765,414
Shares issued in reinvestment of distributions................ 169,489 381,668 8,234 55,942
Shares redeemed............................................... (233,865) (531,570) (21,963) (149,566)
Changes from exercise of exchange privilege:
Shares sold.................................................. 110,764 250,111 3,803 26,000
Shares redeemed.............................................. (371,077) (835,620) (11,855) (80,525)
-------- ---------- -------- ----------
Net increase................................................. 28,581,175 $ 64,472,232 1,707,173 $ 11,617,265
======== ========== ======== ==========
*For the period May 1, 1995 to September 30, 1995.
No Class II Shares were offered for the DynaTech Fund during this period.
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At September 30, 1995, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
DynaTech
Growth Fund Fund Utilities Fund Income Fund
------- ------- -------- -------
<S> <C> <C> <C> <C>
Accumulated net realized gains........................................ $2,390,493 $1,652,070 $19,981,831 $69,953,906
======= ======= ======== =======
U.S. Government
Securities Fund
---------
Capital loss carryovers
<S> <C> <C>
Expiring in:1996........................................................................................ $266,310,966
1997........................................................................................ 92,974,800
1998........................................................................................ 74,910,973
1999........................................................................................ 67,082,683
2002........................................................................................ 111,364,839
2003........................................................................................ 57,944,614
---------
$670,588,875
=========
The U.S. Government Securities Fund had capital loss carryovers of $61,421,160
that expired on September 30, 1995 and were reclassified to paid-in-capital.
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended September 30, 1995, were as follows:
<TABLE>
<CAPTION>
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
-------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchases................................................ $17,507,370$8,155,405$139,617,281$2,872,245,938 $ 595,385,703
======== ======= ======== ========= =========
Sales.................................................... $ 8,076,218$5,480,743$576,984,012$2,578,164,309$1,676,774,964
======== ======= ======== ========= =========
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly based on the net assets of each Fund on
the last day of the month at an annualized rate of 5/8 of 1% of the first $100
million of net assets, 1/2 of 1% of net assets in excess of $100 million up to
and including $250 million, 45/100 of 1% of net assets in excess of $250 million
up to $10 billion, 44/100 of 1% of net assets in excess of $10 billion up to
$12.5 billion, 42/100 of 1% of net assets in excess of $12.5 billion up to $15
billion, 40/100 of 1% of net assets in excess of $15 billion up to $17.5
billion, 38/100 of 1% of net assets in excess of $17.5 billion up to $20
billion, and 36/100 of 1% of net assets in excess of $20 billion. The terms of
the management agreement provide that aggregate annual expenses of each Fund be
limited to the extent necessary to comply with the limitations set forth in the
laws, regulations and administrative interpretations of the states in which each
Fund's shares are registered. For the year ended September 30, 1995, the Funds'
expenses did not exceed these limitations.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
In its capacity as underwriter for the shares of the Corporation,
Franklin/Templeton Distributors, Inc., received commissions on sales of the
Corporation's capital stock. Commissions are deducted from the gross proceeds
received from the sale of the capital stock of the corporation, and as such are
not expenses of the Funds. Franklin/Templeton Distributors, Inc., may also make
payments, out of its own resources, to dealers for certain sales of Class I and
Class II shares. Commissions received by Franklin/Templeton Distributors, Inc.,
and the amounts paid to other dealers for the year ended September 30, 1995,
were as follows:
<TABLE>
<CAPTION>
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
------- ------ -------- -------- ---------
Class I
<S> <C> <C> <C> <C> <C>
Total commissions received ............................ $2,071,604 $231,256 $5,969,730 $36,544,067 $10,781,958
======= ====== ======== ======== =========
Paid to other dealers.................................. $1,848,718 $205,678 $5,611,764 $34,482,998 $10,290,530
======= ====== ======== ======== =========
Class II
Total commissions received ............................ $ 41,251 -- $ 78,161 $ 577,494 $ 120,972
======= ====== ======== ======== =========
Paid to other dealers.................................. $ 81,448 -- $ 159,114 $ 1,303,186 $ 236,263
======= ====== ======== ======== =========
Franklin/Templeton Distributors, Inc., also received contingent deferred sales
charges relating to transactions in the Funds as follows:
DynaTech U.S. Government
Growth Fund Fund Utilities Fund Income Fund Securities Fund
------- ------ -------- -------- ---------
<S> <C> <C>
Class I ............................................... $ 10 -- -- -- $ 892
======= ====== ======== ======== =========
Class II .............................................. $217 -- $280 $4,700 $1,297
======= ====== ======== ======== =========
</TABLE>
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc., the Funds pay costs on a per shareholder account basis.
Shareholder servicing costs incurred by the five Funds for the year ended
September 30, 1995, aggregated $8,908,230 of which $7,958,010 was paid to
Franklin/Templeton Investor Services, Inc.
Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, which was effective May 1, 1994, for Class I, and which
became effective for Class II shares on May 1, 1995, Class I & II shares will
reimburse Franklin/Templeton Distributors, Inc., in an amount up to a maximum of
0.15% and 0.65%, respectively, per annum, of the average daily net assets of
each class of the Income, Utilities and U.S. Government Securities Funds and up
to a maximum of 0.25% and 1.00%, respectively, per annum, of the average daily
net assets of each class of the Growth Fund, for costs incurred in the
promotion, offering and marketing of the Class I and II shares. Fees incurred by
these Funds under the agreement aggregated $19,076,467 for the year ended
September 30, 1995.
Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the DynaTech Fund will reimburse Franklin/Templeton
Distributors, Inc. in an amount up to 0.25% per annum of the Fund's average
daily net assets for costs incurred in the promotion, offering and marketing of
the Funds' shares. Fees incurred by the DynaTech Fund under the agreement
aggregated $136,778 for the year ended September 30, 1995.
During the year ended September 30, 1995, legal fees of $74,623 were incurred to
a law firm in which Brian E. Lorenz, Secretary of the Corporation, is a partner.
Such fees were allocated to each fund as described in Note 1.
Certain officers and directors of the Corporation are also officers and/or
directors of Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc., and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities Exchange Commission pursuant to the Securities Act of 1933. The Fund
may purchase restricted securities through a private offering and they cannot be
sold without prior registration under the Securities Act of 1933 unless such
sale is pursuant to an exemption therefrom. Subsequent costs of registration of
such securities are borne by the issuer. A secondary market exists for certain
privately placed securities. The Fund's restricted securities are currently
valued as disclosed in Note 1.
<TABLE>
<CAPTION>
6. RESTRICTED SECURITIES (cont.)
At September 30, 1995, the Income Fund held restricted securities with a value
aggregating $41,088,720, representing 0.7% of the Fund's net assets. Such
securities are:
Face Acquisition
Amount Security Date Cost Value
------- ----------------------------------------------- ------------ -------- --------
<C> <C> <C> <C> <C>
$40,000,000 Boardwalk Casino, Inc., First Mortgage Bonds, 16.50%, 03/31/05 4/12/95 $37,356,145 $37,356,145
Shares
-------
1,281,869 Boardwalk Casino, Inc., Warrants.............................. 4/12/95 2,643,855 3,690,501
59,258 Zale Corp., Ltd. Partnership.................................. 7/30/93 42,074 42,074
</TABLE>
7. RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Funds value these
securities as disclosed in Note 1. At September 30, 1995, the Utilities Fund and
the Income Fund held 144A securities with a value aggregating $9,886,246 and
$280,043,431 respectively, representing 0.4% and 4.7% of the respective Fund's
net assets. See the accompanying statement of investments in securities and net
assets for specific information of such securities.
8. LOANS OF PORTFOLIO SECURITIES
During the year ended September 30, 1995, the Utilities Fund loaned securities
to certain brokers for which it received cash collateral against the loaned
securities in an amount equal to at least 102% of the market value of the loaned
securities. The cash collateral received is invested by the Fund in short-term
instruments, and any interest income in excess of a predetermined rebate to the
brokers is kept by the fund as interest income. Interest income from this source
amounted to $357,929 for the year ended September 30, 1995.
9. CREDIT RISK AND DEFAULTED SECURITIES
Although the Income Fund has a diversified portfolio, the Fund has 35.0% of its
portfolio invested in lower rated and comparable quality unrated high yield
securities. Investments in higher yield securities are accompanied by a greater
degree of credit risk and such lower rated securities tend to be more sensitive
to economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At September 30, 1995, the
Fund held 3 defaulted securities issued by 3 separate companies with a value
aggregating $38,955,000, representing 0.7% of the Fund's net assets. For
information as to specific securities, see the accompanying statement of
investments in securities and net assets.
For financial reporting purposes, it is the Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
Although each of the Funds has a diversified investment portfolio, there are
certain credit risks due to the manner in which certain Funds are invested,
which may subject the Funds more significantly to economic changes occurring in
certain industries, or sectors as follows:
The Utilities Fund has investments in excess of 10% in the Utilities
Industry.
10. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments in portfolio companies, 5% or more of whose outstanding voting
securities are held by any of the Funds, are defined in the Investment Company
Act of 1940 as affiliated companies. The Growth Fund had investments in such
affiliated companies at September 30, 1995, with a value in the amount of
$6,906.
11. ACQUISITION OF FRANKLIN HAMPTON UTILITIES TRUST
On August 5, 1994, the Franklin Utilities Fund acquired all of the net assets of
Franklin Hampton Utilities Trust pursuant to a plan of reorganization approved
by the shareholders of the Franklin Hampton Utilities Trust on August 5, 1994.
The acquisition was accomplished by a tax-free exchange of Franklin Utilities
Fund shares for all the net assets of the Franklin Hampton Utilities Trust,
which was accounted for as a pooling-of-interests without restatement for
financial reporting purposes.
11. ACQUISITION OF FRANKLIN HAMPTON UTILITIES TRUST (cont.)
The selected financial information and shares outstanding for the funds,
immediately before and after the acquisition were as follows:
<TABLE>
<CAPTION>
Unrealized
Net Asset Undistributed Accumulated Appreciation
Value Shares Exchange Net InvestmentNet Realized(Depreciation)
Net Assets Per ShareOutstanding Ratio Income Gain (Loss)on Investments
--------- ----- ------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin Hampton Utilities Trust $ 12,798,053 $12.39 1,032,684 1.42284730 $-- $ 2,308 $3,694,964
Franklin Utilities Fund ........ 2,746,347,100 8.71 315,260,781 22,351,674 (3,580,742)(112,655,303)
Combined........................ 2,759,145,153 8.71 316,730,133 22,351,674 (3,578,434)(108,960,339)
12. SUBSEQUENT EVENTS
On September 18, 1995 and October 20, 1995, the Board of Directors declared
distributions as follows:
From
Undistributed Net
Fund Record Date Payment Date Investment Income
- ----------------------------------------------------------------------------- ------- -------- -----------
<S> <C> <C> <C>
U.S. Government Securities Fund - Class I.................................... 9/29 10/13 $.041
U.S. Government Securities Fund - Class II................................... 9/29 10/13 .037
U.S. Government Securities Fund - Class I.................................... 10/31 11/15 .041
U.S. Government Securities Fund - Class II................................... 10/31 11/15 .037
Income Fund - Class I........................................................ 9/29 10/13 .015
Income Fund - Class II....................................................... 9/29 10/13 .014
Income Fund - Class I........................................................ 10/31 11/15 .015
Income Fund - Class II....................................................... 10/31 11/15 .014
</TABLE>
13. OTHER CONSIDERATIONS
Franklin Advisers, Inc., as the Fund's manager, may serve as a member of various
formal or informal credit committees, representing credit interests in certain
corporate restructuring negotiations. As a result of this involvement in these
committees or as a result of its discussions with the issuer, Franklin Advisers,
Inc. may be in possession of certain material non-public information. The fund's
manager has not nor does it intend to sell any of its holdings in these
securities while in possession of material non-public information in
contravention of the Federal Securities laws. As of September 30, 1995, the
manager and thus the fund may have been deemed to have material non-public
information with respect to Bibb Co.
14. FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each year
by Fund are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data+++
------------------------------------------------------- ---------------------------
Net Distri- Ratio
Realized & Distri- butions Net of Net
Net Asset Net Unrealized Total butions from Asset Net Assets Ratio of Investment
Value at Invest- Gain From From Net Realized Total Value at End Expenses Income to Portfolio
Year Beginning ment (Loss) on Investment Investment Capital Distri- at End Total of Year to Average Average Turnover
Ended of Year Income Securities Operations Income Gains butions of Year Return*** (in 000's) Net Assets Net Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund:**
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.69 $.325 $2.703 $3.028 $(.268) $ -- $(.268) $13.45 28.65% $ 331,392 .70% 2.58% 7.98%
1992 13.45 .229 .524 .753 (.353) (.150) (.503) 13.70 5.73 532,971 .66 2.06 .81
1993 13.70 .232 .575 .807 (.189) (.068) (.257) 14.25 5.87 560,824 .64 1.64 1.70
1994 14.25 .190 .899 1.089 (.297) (.082) (.379) 14.96 7.63 516,620 .77 1.23 6.52
1995++ 14.96 .170 4.427 4.597 (.135) (.042) (.177) 19.38 31.11 712,866 .90 1.08 1.39
Class II Shares:
1995+ 16.88 .023 2.427 2.450 -- -- -- 19.33 14.72 4,161 1.79++ 0.37++ 1.39
DynaTech Fund:**
Class I Shares:
1991 6.77 .126 1.952 2.078 (.168) -- (.168) 8.68 31.21 48,867 .93 1.57 7.12
1992 8.68 .120 .522 .642 (.112) -- (.112) 9.21 7.29 64,595 .81 1.42 10.70
1993 9.21 .102 1.207 1.309 (.117) (.112) (.229) 10.29 14.36 71,469 .81 1.03 26.56
1994 10.29 .070 .210 .280 (.124) (.596) (.720) 9.85 2.89 67,413 1.00 .69 9.73
1995 9.85 .118 2.991 3.109 (.049) (.130) (.179) 12.78 32.10 92,987 1.01 1.11 9.84
14. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data+++
------------------------------------------------------- ---------------------------
Net Distri- Ratio
Realized & Distri- butions Net of Net
Net Asset Net Unrealized Total butions from Asset Net Assets Ratio of Investment
Value at Invest- Gain From From Net Realized Total Value at End Expenses Income to Portfolio
Year Beginning ment (Loss) on Investment Investment Capital Distri- at End Total of Year to Average Average Turnover
Ended of Year Income Securities Operations Income Gains butions of Year Return*** (in 000's) Net Assets Net Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $ 7.48 $.535 $1.385 $1.920 $(.590) $ -- $(.590) $ 8.81 26.15% $ 1,226,118 .59% 6.44% .89%
1992 8.81 .530 .849 1.379 (.559) -- (.559) 9.63 15.89 2,191,095 .57 5.90 1.39
1993 9.63 .534 1.161 1.695 (.545) -- (.545) 10.78 17.83 3,626,774 .55 5.30 7.81
1994 10.78 .550 (2.436) (1.886) (.524) (.040) (.564) 8.33 (17.94) 2,572,508 .64 5.76 6.34
1995 8.33 .527 1.424 1.951 (.524) (.007) (.531) 9.75 24.19 2,765,976 .73 5.88 5.55
Class II Shares:
1995+ 8.89 .228 .880 1.108 (.248) -- (.248) 9.75 13.01 8,369 1.21++ 5.15++ 5.55
Income Fund:
Class I Shares:
1991 1.76 .190 .350 .540 (.220) -- (.220) 2.08 32.60 1,673,187 .56 10.17 33.92
1992 2.08 .190 .194 .384 (.205) (.009) (.214) 2.25 18.80 2,483,501 .55 9.11 23.30
1993 2.25 .180 .227 .407 (.185) (.012) (.197) 2.46 18.76 3,935,444 .54 7.84 25.41
1994 2.46 .170 (.201) (.031) (.180) (.029) (.209) 2.22 (1.52) 4,891,505 .64 7.37 23.37
1995 2.22 .180 .108 .288 (.180) (.028) (.208) 2.30 14.00 5,885,788 .71 8.26 58.64
Class II Shares:
1995+ 2.18 .079 .113 .192 (.072) -- (.072) 2.30 8.96 65,822 1.23++ 7.89++ 58.64
U.S. Government Securities Fund:*
Class I Shares:
1991 6.86 .653 .287 .940 (.660) -- (.660) 7.14 13.97 12,426,910 .52 9.26 22.14
1992 7.14 .609 .106 .715 (.595) -- (.595) 7.26 10.14 13,617,157 .53 8.46 38.75
1993 7.26 .557 (.056) .501 (.561) -- (.561) 7.20 6.86 14,268,516 .52 7.71 43.10
1994 7.20 .500 (.678) (.178) (.512) -- (.512) 6.51 (2.75) 11,668,747 .55 7.37 18.28
1995 6.51 .497 .348 .845 (.485) -- (.485) 6.87 13.56 11,101,605 .61 7.50 5.48
Class II Shares:
1995+ 6.67 .206 .167 .373 (.193) -- (.193) 6.85 5.66 11,695 1.18++ 6.48++ 5.48
+For the period May 1, 1995 (effective date) to September 30, 1995.
++Annualized.
+++Ratios for the year ended 1995, Class I and Class II, have been calculated
using the daily average net assets during the period.
*Maturity of U.S. government issues and the reinvestment of the proceeds thereof
are considered as purchases and sales of securities in computing the portfolio
turnover rate.
**Data prior to 1992 has been adjusted to reflect a two-for-one stock split in
the form of a 100% stock dividend to shareholders of record effective on the
beginning of business on June 1, 1992.
***Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge or the deferred contingent sales charge. Prior to May 1, 1994, the total
return for Class I shares also assumes reinvestment of dividends at offering
price and capital gains, if any, at net asset value. Effective May 1, 1994, with
the implementation of the Rule 12b-1 distribution plan for Class I shares, as
disclosed in Note 5, the existing sales charge on reinvested dividends has been
eliminated.
aPer share amounts have been calculated using the daily average shares
outstanding during the period.
Under IRC 854(b)(2) of the Internal Revenue Code, the Funds hereby designate the
following percentage amounts of their ordinary income dividends paid by the
Funds during the fiscal year ended September 30, 1995, as income qualifying for
the dividends received deduction.
Growth Fund 99.88% DynaTech Fund 41.32% Utilities Fund 90.73% Income Fund 27.99%
</TABLE>
REPORT OF INDEPENDENT AUDITORS
Franklin Custodian Funds, Inc.
To the Shareholders and Board of Directors
of Franklin Custodian Funds:
We have audited the accompanying statements of assets and liabilities of the
five funds comprising the Franklin Custodian Funds, Inc. (the Corporation),
including each Fund's statements of investments in securities and net assets, as
of September 30, 1995, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated thereon. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
five funds comprising the Franklin Custodian Funds as of September 30, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
November 3, 1995
Franklin Custodian Funds, Inc.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's portfolio breakdown, as a
percentage of the fund's total net assets.
Portfolio Breakdown on 9/30/95
Pharmaceuticals 10.0%
Aerospace 8.2%
Biotechnology 2.2%
Business Services 4.7%
Chemicals 4.3%
Communications & Entertainment 7.0%
Energy/Energy Services 4.4%
Diversified Manufacturers 3.1%
Telecommunications 2.5%
Retailers 2.0%
Health Care -- Diversified 9.9%
Environmental Protection & Purification 7.8%
Electronics & Electrical Equipment 6.7%
Data Processing 9.5%
Transportation 8.7%
Other Stocks 3.6%
Short-Term Obligations & Other net assets 5.4%
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the Franklin
Growth Fund to that of the S&P 500 Stock Index, based on a $10,000 investment
from 10/1/85 to 9/30/95, for the Class I shares.
Period Ending Growth Fund S&P 500
10/1/85 $ 9,546 $ 10,000
12/31/85 $ 11,077 $ 11,720
3/31/86 $ 12,289 $ 13,373
6/30/86 $ 12,678 $ 14,160
9/30/86 $ 11,924 $ 13,172
12/31/86 $ 12,707 $ 13,905
3/31/87 $ 15,103 $ 16,874
6/30/87 $ 15,961 $ 17,721
9/30/87 $ 16,836 $ 18,891
12/31/87 $ 15,250 $ 14,635
3/31/88 $ 15,977 $ 15,468
6/30/88 $ 16,712 $ 16,498
9/30/88 $ 16,298 $ 16,554
12/31/88 $ 16,644 $ 17,065
3/31/89 $ 17,484 $ 18,275
6/30/89 $ 18,591 $ 19,889
9/30/89 $ 20,721 $ 22,019
12/31/89 $ 20,604 $ 22,473
3/31/90 $ 20,595 $ 21,796
6/30/90 $ 21,967 $ 23,167
9/30/90 $ 19,169 $ 19,984
12/31/90 $ 21,031 $ 21,775
3/31/91 $ 23,995 $ 24,938
6/30/91 $ 23,940 $ 24,881
9/30/91 $ 24,683 $ 26,212
12/31/91 $ 26,648 $ 28,409
3/31/92 $ 26,181 $ 27,690
6/30/92 $ 25,609 $ 28,216
9/30/92 $ 26,124 $ 29,105
12/31/92 $ 27,438 $ 30,569
3/31/93 $ 27,185 $ 31,905
6/30/93 $ 27,360 $ 32,061
9/30/93 $ 27,671 $ 32,888
12/31/93 $ 29,387 $ 33,651
3/31/94 $ 27,474 $ 32,376
6/30/94 $ 28,311 $ 32,512
9/30/94 $ 29,805 $ 34,102
12/31/94 $ 30,245 $ 34,095
3/31/95 $ 33,088 $ 37,416
6/30/95 $ 36,132 $ 40,989
9/30/95 $ 39,076 $ 44,248
GRAPHIC MATERIAL (3)
This chart shows in pie chart format the fund's portfolio breakdown, as a
percentage of the fund's total net assets.
Portfolio Breakdown on 9/30/95
Semiconductors 13.8%
Telecommunications 14.1%
Environmental Services 3.1%
Software 9.4%
Medical Services 4.1%
Computers 7.6%
Pharmeceuticals 4.8%
Networking 5.0%
Retail 3.6%
Precision Instruments 3.5%
Data Services 1.5%
Other 4.8%
Short-Term Obligations & Other net assets 24.7%
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the Franklin
DynaTech Fund to that of the S&P 500 Stock Index and the Hambrecht & Quist
Technology Index, based on a $10,000 investment from 10/1/85 to 9/30/95.
Period Ending DynaTech Fund S&P 500 Stock Ind. H&Q Tech.
10/01/85 $ 9,557 $10,000 $ 10,000
12/31/85 $ 10,875 $11,720 $ 11,780
03/31/86 $ 11,705 $13,373 $ 12,590
06/30/86 $ 11,983 $14,160 $ 12,651
09/30/86 $ 9,871 $13,172 $ 11,638
12/31/86 $ 10,252 $13,905 $ 12,123
03/31/87 $ 13,169 $16,874 $ 16,651
06/30/87 $ 13,522 $17,721 $ 17,074
09/30/87 $ 14,672 $18,891 $ 18,955
12/31/87 $ 11,657 $14,635 $ 13,981
03/30/88 $ 12,371 $15,468 $ 13,843
06/30/88 $ 13,434 $16,498 $ 14,841
09/30/88 $ 12,267 $16,554 $ 13,161
12/31/88 $ 12,413 $17,065 $ 13,150
03/31/89 $ 13,122 $18,275 $ 13,252
06/30/89 $ 14,559 $19,889 $ 13,953
09/30/89 $ 15,996 $22,019 $ 14,660
12/31/89 $ 16,106 $22,473 $ 14,264
03/31/90 $ 16,463 $21,796 $ 14,724
06/30/90 $ 18,557 $23,167 $ 15,983
09/30/90 $ 15,577 $19,984 $ 11,562
12/31/90 $ 16,618 $21,775 $ 13,042
03/31/91 $ 19,622 $24,938 $ 16,924
06/30/91 $ 19,433 $24,881 $ 16,080
09/30/91 $ 20,458 $26,212 $ 16,760
12/31/91 $ 22,510 $28,409 $ 19,282
03/31/92 $ 22,259 $27,690 $ 19,922
06/30/92 $ 21,782 $28,216 $ 18,273
09/30/92 $ 21,973 $29,105 $ 19,051
12/31/92 $ 23,455 $30,569 $ 22,179
03/31/93 $ 23,992 $31,905 $ 21,856
06/30/93 $ 24,359 $32,061 $ 22,325
09/30/93 $ 25,140 $32,888 $ 22,723
12/31/93 $ 25,197 $33,651 $ 24,204
03/31/94 $ 25,039 $32,376 $ 24,425
06/30/94 $ 24,067 $32,512 $ 22,654
09/30/94 $ 25,880 $34,102 $ 25,846
12/31/94 $ 26,510 $34,095 $ 28,097
03/31/95 $ 28,088 $37,416 $ 31,272
06/30/95 $ 32,448 $40,989 $ 37,936
09/30/95 $ 34,187 $44,248 $ 43,201
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund's portfolio breakdown, as a
percentage of the fund's total net assets.
Portfolio Breakdown on 9/30/95
Common Stocks 80.8%
Corporate Bonds 9.0%
Short-Term Obligations & Other Net Assets 10.2%
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the Franklin
Utilities Fund to that of the S&P 500 Stock Index, based on a $10,000 investment
between 10/1/85 and 9/30/95, for the Class I shares.
Period Ending Franklin S&P 500
Utilities
10/1/85 $ 9,571 $ 10,000
12/31/85 $ 10,698 $ 11,720
3/31/86 $ 12,154 $ 13,373
6/30/86 $ 12,641 $ 14,160
9/30/86 $ 13,057 $ 13,172
12/31/86 $ 13,240 $ 13,905
3/31/87 $ 13,575 $ 16,874
6/30/87 $ 13,266 $ 17,721
9/30/87 $ 13,165 $ 18,891
12/31/87 $ 12,513 $ 14,635
3/31/88 $ 12,994 $ 15,468
6/30/88 $ 13,634 $ 16,498
9/30/88 $ 13,738 $ 16,554
12/31/88 $ 13,969 $ 17,065
3/31/89 $ 13,922 $ 18,275
6/30/89 $ 15,349 $ 19,889
9/30/89 $ 16,081 $ 22,019
12/31/89 $ 17,578 $ 22,473
3/31/90 $ 16,716 $ 21,796
6/30/90 $ 16,891 $ 23,167
9/30/90 $ 15,977 $ 19,984
12/31/90 $ 17,646 $ 21,775
3/31/91 $ 18,383 $ 24,938
6/30/91 $ 18,329 $ 24,881
9/30/91 $ 20,213 $ 26,212
12/31/91 $ 21,912 $ 28,409
3/31/92 $ 20,885 $ 27,690
6/30/92 $ 22,235 $ 28,216
9/30/92 $ 23,482 $ 29,105
12/31/92 $ 23,903 $ 30,569
3/31/93 $ 25,855 $ 31,905
6/30/93 $ 26,458 $ 32,061
9/30/93 $ 27,729 $ 32,888
12/31/93 $ 26,657 $ 33,651
3/31/94 $ 24,004 $ 32,376
6/30/94 $ 22,242 $ 32,512
9/30/94 $ 22,779 $ 34,102
12/31/94 $ 23,541 $ 34,095
3/31/95 $ 24,543 $ 37,416
6/30/95 $ 26,522 $ 40,989
9/30/95 $ 28,290 $ 44,248
GRAPHIC MATERIAL (7)
This chart shows in pie chart format the fund's portfolio breakdown, as a
percentage of the fund's total net assets.
Portfolio Breakdown on 9/30/95
Corporate Bonds 30.6%
Oil & Gas Stocks 3.7%
Foreign Bonds 12.3%
Consumer Goods Stocks 1.7%
U.S. Treasury Bonds & Notes 3.1%
Pharmeceuticals Stocks 4.0%
Gold Stocks 4.3%
Utilities Stocks 16.3%
Other 2.1%
Cash & Equivalents 21.9%
GRAPHIC MATERIAL (8)
The following line graph compares the performance of the Franklin Income Fund to
that of the S&P 500 Stock Index, the Lehman Brothers Govt./Corporate Bond Index,
and the Lipper Income Funds Average, based on a $10,000 investment between
10/1/85 and 9/30/95, for the Class I shares.
Date Income Fund S&P 500 LB Gov't/Corp Lipper
Income Avg
10/1/85 $ 9,581 $10,000 $10,000 $10,000
12/31/85 $ 10,279 $11,720 $10,757 $11,111
3/31/86 $ 11,309 $13,373 $11,675 $12,287
6/30/86 $ 11,335 $14,160 $11,829 $12,648
9/30/86 $ 11,950 $13,172 $12,068 $12,563
12/31/86 $ 12,298 $13,905 $12,438 $13,040
3/31/87 $ 13,548 $16,874 $12,622 $14,067
6/30/87 $ 13,238 $17,721 $12,384 $13,994
9/30/87 $ 13,085 $18,891 $12,022 $14,030
12/31/87 $ 12,897 $14,635 $12,724 $13,147
3/31/88 $ 13,539 $15,468 $13,180 $13,855
6/30/88 $ 13,831 $16,498 $13,310 $14,205
9/30/88 $ 13,928 $16,554 $13,559 $14,428
12/31/88 $ 14,033 $17,065 $13,689 $14,600
3/31/89 $ 14,476 $18,275 $13,838 $15,086
6/30/89 $ 15,297 $19,889 $14,951 $15,917
9/30/89 $ 15,549 $22,019 $15,092 $16,553
12/31/89 $ 15,811 $22,473 $15,636 $16,778
3/31/90 $ 15,463 $21,796 $15,458 $16,509
6/30/90 $ 15,989 $23,167 $16,015 $17,008
9/30/90 $ 14,617 $19,984 $16,111 $16,086
12/31/90 $ 14,424 $21,775 $16,932 $16,800
3/31/91 $ 16,828 $24,938 $17,388 $18,257
6/30/91 $ 17,857 $24,881 $17,650 $18,582
9/30/91 $ 19,474 $26,212 $18,665 $19,860
12/31/91 $ 20,360 $28,409 $19,660 $20,954
3/31/92 $ 21,722 $27,690 $19,365 $21,175
6/30/92 $ 22,819 $28,216 $20,151 $21,801
9/30/92 $ 23,221 $29,105 $21,135 $22,595
12/31/92 $ 23,462 $30,569 $21,150 $23,033
3/31/93 $ 25,339 $31,905 $22,135 $24,212
6/30/93 $ 26,492 $32,061 $22,801 $24,755
9/30/93 $ 27,663 $32,888 $23,558 $25,557
12/31/93 $ 28,515 $33,651 $23,490 $25,823
3/31/94 $ 27,042 $32,376 $22,750 $25,030
6/30/94 $ 26,623 $32,512 $22,468 $24,920
9/30/94 $ 27,289 $34,102 $22,580 $25,428
12/31/94 $ 26,697 $34,095 $22,664 $25,080
3/31/95 $ 27,795 $37,416 $23,793 $26,477
6/30/95 $ 29,832 $40,989 $25,334 $28,068
9/30/95 $ 31,110 $44,248 $25,818 $29,390
GRAPHIC MATERIAL (9)
This bar chart shows the comparison between the fund's yield of 6.55%, the
Average Ginnie Mae Fund yield of 6.04%, the One-Year CD yield of 5.30%, and the
Average Money Market Fund yield of 5.08%.
GRAPHIC MATERIAL (10)
The following chart shows in data point format the comparison in terms of risk
on a scale of 0 (lower) to 10 (higher) and return on a scale of 0% (lower) to
14%(higher)between the fund, the One-Year CD, the 10-Year Treasury, and the
30-Year Treasury between 10/90 and 9/95.
Risk Return
ML10yr 6.72 9.92
ML30yr 9.31 12.25
USG 3.32 8.44
CDs 1 Yr $U 0.4 4.69
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the the U.S.
Government Securities Fund to that of the Lehman Brothers Intermediate U.S.
Government Bond Index, and the Consumer Price Index, based on a $10,000
investment between 10/1/85 and 9/30/95, for the Class I shares.
Period LB IntGov CPI
Ending
10/1/85 $10,000
10/1/85 $ 9,569 $ 10,000 $ 10,000
10/31/85 $ 9,747 $ 10,148 $ 10,037
11/30/85 $ 9,980 $ 10,323 $ 10,065
12/31/85 $10,121 $ 10,570 $ 10,093
1/31/86 $10,183 $ 10,636 $ 10,121
2/28/86 $10,340 $ 10,888 $ 10,093
3/31/86 $10,487 $ 11,181 $ 10,047
4/30/86 $10,536 $ 11,255 $ 10,029
5/31/86 $10,367 $ 11,109 $ 10,057
6/30/86 $10,482 $ 11,378 $ 10,112
7/31/86 $10,655 $ 11,503 $ 10,112
8/31/86 $10,815 $ 11,771 $ 10,130
9/30/86 $10,888 $ 11,661 $ 10,177
10/31/86 $10,992 $ 11,808 $ 10,186
11/30/86 $11,148 $ 11,921 $ 10,195
12/31/86 $11,208 $ 11,952 $ 10,204
1/31/87 $11,345 $ 12,060 $ 10,269
2/28/87 $11,452 $ 12,120 $ 10,306
3/31/87 $11,483 $ 12,093 $ 10,352
4/30/87 $11,171 $ 11,879 $ 10,408
5/31/87 $11,156 $ 11,853 $ 10,444
6/30/87 $11,347 $ 11,993 $ 10,481
7/31/87 $11,391 $ 12,019 $ 10,508
8/31/87 $11,404 $ 11,988 $ 10,564
9/30/87 $11,174 $ 11,838 $ 10,619
10/31/87 $11,416 $ 12,191 $ 10,646
11/30/87 $11,578 $ 12,264 $ 10,656
12/31/87 $11,692 $ 12,383 $ 10,656
1/31/88 $12,058 $ 12,690 $ 10,684
2/29/88 $12,157 $ 12,825 $ 10,711
3/31/88 $12,136 $ 12,771 $ 10,758
4/30/88 $12,133 $ 12,749 $ 10,813
5/31/88 $12,112 $ 12,688 $ 10,850
6/30/88 $12,371 $ 12,895 $ 10,897
7/31/88 $12,332 $ 12,856 $ 10,943
8/31/88 $12,328 $ 12,873 $ 10,989
9/30/88 $12,539 $ 13,095 $ 11,062
10/31/88 $12,753 $ 13,276 $ 11,099
11/30/88 $12,640 $ 13,162 $ 11,108
12/31/88 $12,563 $ 13,175 $ 11,126
1/31/89 $12,726 $ 13,307 $ 11,182
2/28/89 $12,704 $ 13,248 $ 11,228
3/31/89 $12,700 $ 13,311 $ 11,293
4/30/89 $12,924 $ 13,580 $ 11,367
5/31/89 $13,228 $ 13,842 $ 11,431
6/30/89 $13,553 $ 14,195 $ 11,459
7/31/89 $13,725 $ 14,483 $ 11,486
8/31/89 $13,662 $ 14,287 $ 11,505
9/30/89 $13,717 $ 14,356 $ 11,541
10/31/89 $13,933 $ 14,657 $ 11,597
11/30/89 $14,091 $ 14,802 $ 11,625
12/31/89 $14,209 $ 14,845 $ 11,643
1/31/90 $14,143 $ 14,753 $ 11,763
2/28/90 $14,222 $ 14,808 $ 11,818
3/31/90 $14,260 $ 14,826 $ 11,883
4/30/90 $14,234 $ 14,777 $ 11,902
5/31/90 $14,570 $ 15,093 $ 11,930
6/30/90 $14,733 $ 15,292 $ 11,994
7/31/90 $15,005 $ 15,506 $ 12,040
8/31/90 $14,974 $ 15,450 $ 12,151
9/30/90 $15,075 $ 15,588 $ 12,253
10/31/90 $15,243 $ 15,805 $ 12,326
11/30/90 $15,525 $ 16,043 $ 12,353
12/31/90 $15,740 $ 16,265 $ 12,353
1/31/91 $15,957 $ 16,432 $ 12,427
2/28/91 $16,039 $ 16,532 $ 12,446
3/31/91 $16,168 $ 16,623 $ 12,465
4/30/91 $16,317 $ 16,795 $ 12,483
5/31/91 $16,466 $ 16,889 $ 12,521
6/30/91 $16,547 $ 16,902 $ 12,557
7/31/91 $16,794 $ 17,085 $ 12,576
8/31/91 $16,995 $ 17,409 $ 12,613
9/30/91 $17,246 $ 17,705 $ 12,668
10/31/91 $17,475 $ 17,907 $ 12,687
11/30/91 $17,575 $ 18,117 $ 12,724
12/31/91 $17,898 $ 18,557 $ 12,733
1/31/92 $17,777 $ 18,379 $ 12,752
2/29/92 $17,904 $ 18,436 $ 12,798
3/31/92 $17,857 $ 18,362 $ 12,863
4/30/92 $17,986 $ 18,527 $ 12,881
5/31/92 $18,260 $ 18,803 $ 12,899
6/30/92 $18,484 $ 19,074 $ 12,945
7/31/92 $18,656 $ 19,440 $ 12,973
8/31/92 $18,909 $ 19,638 $ 13,009
9/30/92 $19,058 $ 19,909 $ 13,045
10/31/92 $18,918 $ 19,671 $ 13,091
11/30/92 $18,990 $ 19,590 $ 13,109
12/31/92 $19,222 $ 19,843 $ 13,100
1/31/93 $19,483 $ 20,212 $ 13,164
2/28/93 $19,692 $ 20,509 $ 13,210
3/31/93 $19,792 $ 20,585 $ 13,257
4/30/93 $19,894 $ 20,745 $ 13,294
5/31/93 $19,996 $ 20,689 $ 13,312
6/30/93 $20,210 $ 20,989 $ 13,331
7/31/93 $20,314 $ 21,031 $ 13,331
8/31/93 $20,418 $ 21,345 $ 13,368
9/30/93 $20,430 $ 21,432 $ 13,396
10/31/93 $20,470 $ 21,484 $ 13,451
11/30/93 $20,395 $ 21,378 $ 13,461
12/31/93 $20,551 $ 21,466 $ 13,461
1/31/94 $20,738 $ 21,678 $ 13,497
2/28/94 $20,545 $ 21,381 $ 13,543
3/31/94 $19,968 $ 21,069 $ 13,589
4/30/94 $19,833 $ 20,932 $ 13,608
5/31/94 $19,846 $ 20,947 $ 13,618
6/30/94 $19,755 $ 20,951 $ 13,664
7/31/94 $20,117 $ 21,226 $ 13,701
8/31/94 $20,178 $ 21,287 $ 13,756
9/30/94 $19,903 $ 21,110 $ 13,793
10/31/94 $19,841 $ 21,115 $ 13,802
11/30/94 $19,811 $ 21,022 $ 13,820
12/31/94 $19,998 $ 21,091 $ 13,820
1/31/95 $20,405 $ 21,435 $ 13,876
2/28/95 $20,910 $ 21,849 $ 13,931
3/31/95 $21,005 $ 21,969 $ 13,977
4/30/95 $21,292 $ 22,224 $ 14,023
5/31/95 $22,001 $ 22,850 $ 14,051
6/30/95 $22,133 $ 22,997 $ 14,079
7/31/95 $22,169 $ 23,008 $ 14,079
8/31/95 $22,401 $ 23,197 $ 14,116
9/30/95 $22,602 $ 23,352 $ 14,144
CUM. TR 126.02% 133.52% 41.44%
